Unstructured Finance

Einhorn’s Field of Dreams

By Matthew Goldstein

David Einhorn’s decision to plunk $200 million on the cash-strapped NY Mets could be a bullish development for investors holding the bonds to finance the baseball team’s new stadium.

At last look, most of the bonds that were sold in 2006 to finance the construction of Citi Fields were selling for between 79 cents and 85 cents on the dollar. The distressed price for the $547 million bond issuance is a reflection of the dire financial situation the Mets are in and the reason principal owner Fred Wilpon is selling a big minority stake to Einhorn.

But if Major League Baseball approves the deal with the Greenlight Capital hedge fund manager, it could boost the value of those stadium bonds.

One reason the Citi Fields bonds are trading well below face value is out of concern the Mets–in particular the Wilpons–won’t be able to service the debt payments given the amount of red ink the team is piling up.

But some distressed investors who have been snapping up the stadium debt contend the securities are a low risk proposition since the issuer of the bonds—New York City Industrial Agency–is a part owner of the stadium. So-called vulture investors contend that since an entity controlled by the Mets technically sub-leases the stadium and some of the income to pay down the bonds comes from “revenue generated at the stadium.” The biggest risk of a default is if the Mets go out of business, move or there is a long baseball strike.

Grassley the inquisitor

Sen. Chuck Grassley wants to know what the Securities and Exchange Commission did with complaints it received about potential improper trading by Steve Cohen’s SAC Capital.

But Grassley’s request that the SEC provide an official accounting for its actions seems a bit odd, given that securities regulators recently settled an insider trading case with former SAC Capital analyst Jonathan Hollander.

With federal prosecutors continuing to look into allegations of improper trading at Cohen’s fund, it’s hard to make the argument that SAC Capital hasn’t been investigated. Indeed, Reuters first reported in December 2009, that as far back as 2007 FBI agents have been looking into allegations of improper trading at SAC Capital.

Steve Cohen runs away from his Fairfax co-defendants

Steven Cohen wants a five-year-old stock manipulation lawsuit filed by Canadian insurer Fairfax Financial Holdings to go away.

Earlier this month, lawyers for Cohen’s SAC Capital Advisors filed a motion for summary judgment, claiming Fairfax has failed to produce any evidence his $13 billion hedge fund conspired with other traders to crush the insurers stock. SAC Capital’s lawyers write that even though Fairfax has “received millions of pages of documents from SAC, other defendants, and third parties…not a single scrap of evidence suggests that Mr. Cohen engaged in even one of these alleged acts.”

Fairfax, in the long-running lawsuit, contends that SAC Capital conspired with other big named hedge funds to spread negative information about Fairfax to drive down the stock’s price. The insurer contends the hedge funds were shorting–or betting against–Fairfax’s stock.