Ahh, nothing to worry about, they will just print some more $100's.
We talked about this before with Citadel, so now we have
leverage chasing leverage...
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Citadel sells $500 million in notes
Hedge fund's unusual bond issuance carries above-average yield
Citadel Investment Group LLC, the Chicago-based hedge fund controlled by Kenneth Griffin, sold $500 million of five-year notes Thursday, according to a person familiar with the transaction.
The fund sold the notes at a yield of 1.90 percentage points more than similar-maturity Treasuries, said the person, who declined to be identified because the sale is private. The average yield premium, or spread, on similarly rated notes is 1.22 percentage points, according to Merrill Lynch & Co.
Citadel announced last month that it planned to sell as much as $2 billion in debt to investors in one of the hedge fund industry's biggest private placements ever. Each note issue is drawn down from that level, according to Fitch Ratings.
Fitch and Standard & Poor's assigned investment-grade ratings to the debt, Fitch at BBB-plus and S&P one level lower at BBB. Debt rated above BB-plus is considered investment grade.
Hedge funds typically don't issue bonds in the public market and go to large investment banks for financing.
With the tremendous amount of cash looking for new investments, issuers have been able to secure looser terms in bonds than with banks, said Jim Cusser, a portfolio manager at Waddell & Reed in Kansas City, Mo., who isn't planning on purchasing the Citadel bonds.
The sale shows that "credit markets are pushing limits," said Mark Kiesel, an executive vice president who oversees $50 billion in corporate bonds at Newport Beach, Calif.-based Pacific Investment Management Co.
Pimco, manager of the world's biggest bond fund, didn't buy the Citadel debt, Kiesel said.
"When you don't like the business, and you can't get your hands around it, no spread is enough," he said.
The bonds will be sold through a medium-term-note program, which allows companies to issue unsecured, continuously offered obligations with maturities ranging from nine months to 40 years.
Citadel, which has about $12.8 billion of assets, is the latest in its industry to try to capitalize on wider investor interest in hedge funds. |
