RE: Evening standard article6 Feb 2020 08:58
Yet some in the City question ARCM’s motives. In December the hedge fund was forced to disclose a secret 17% short position in Premier shares, unknown to the Premier board and fellow investors. Rivals have urged the Financial Conduct Authority to investigate.
The hedge fund claims it is a benign hedge on the massive Premier IOUs it owns (indeed the $455 million of debts dwarf the $190 million short position) but analysts say ARCM’s main motivation now is to kill off the deal so it can stem losses on the short.
Broker Numis said the hedge fund “lacked credibility” for attacking Premier but failing to mention the short.
One Premier shareholder also told the Standard ARCM was using its position as creditor to “screw equity holders” but had sympathy for this approach. “They are making their own catalyst.”
Premier has a myriad of other lenders alongside ARCM including Lloyds Bank, DNB, Deutsche Bank, Fortress and Verde (the latter two hedge funds not known to be shrinking violets).
Creditors will meet next Wednesday to vote on the debt extension plans.
Premier’s secondary debts also trade at 100p in the pound, a sign that impending debt Armageddon is not on the cards.
If the deal is so bad, as ARCM insists, then why do most of Premier’s lenders back the idea?
Market sources believe ARCM has already made big profits on the debt portion — buying as low as 55p in the pound — but now wants to preserve that gain by reversing losses on the short made when shares rallied. To do that it aims to cast doubt on the deal.
It’s hard to fathom whether ARCM is a genuinely concerned investor ringing the alarm bell or a cunning hedge fund looking to protect its own economic interests. Perhaps it is both.
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