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Absolute Capital Group - mezzanine CDOs, PINs

2008-03-18

Count of distinct funds: 3
Capital base: $A400M
Loss: 30-40%

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stories: com.au, bloomberg.com

2008-03-18:

Apparently the news about Absolute being in administration slipped under our radar last month. In addition, another Absolute fund is being liquidated, this one in packaged income notes (PINs). The first article above has more:

"The liquidation event is a result of it not being possible to effect redemptions in six of the investments within the credit investment portfolio."

The six investments are: Airlie Opportunity Fund Cayman; Carrington Investment Partners (Cayman), LP; NAC European Credit Fund; Absolute Capital Yield Strategies Fund; Horizon Fund, L.; Alcentra European Credit Fund.

The estimated total value of assets in these six funds, as at Friday was $NZ8 million, or 26 per cent of the nominal value of the fund.

More on extent of the loss an exposure:

It said ABN Amro was still committed to repay principal on January, 31, 2013.

The present value of $100 of the securities is estimated at $68.27. The securities had an estimated net asset value of $84.70 per $100.

Absolute was said to have $A400 under management.

We're unclear on the number of distinct funds being liquidated. If anyone can clarify, please drop us a line.

Original Post, 2007-07-26:

Absolute is an Australian shop 50%-owned by ABN Amro. The two funds of concern are Yield Strategies Fund and Yield Strategies Fund NZD, with about AUD 200 million under management. While Absolute claims they have little invested in "subprime" per se, they do invest in mid-tiers of mortgage-backed securities, which are also feeling the pinch as delinquencies rise:

Entwistle said 50 percent of Absolute Capital's two funds is invested in the so-called ``mezzanine'' portions of CDOs, which are typically assigned the second-highest non-investment grade rating of BB by ratings companies.

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Important: This fund is on our list of hedge funds that have "imploded" (see also ailing lenders). However, please note that "imploded" is a somewhat subjective. The "imploded" list contains hedge funds (or other unregulated and autonomous speculative investment funds) which have gone through some sort of permanent adverse change. This is a somewhat subjective call, and does not necessarily mean total shutdown or bankruptcy. It can also mean steep and rapid mark-downs in net asset value; or abnormal "bail-out" by corporate parents or peers in order to avoid write-downs and provide liquidity. The funds are of any type and sector.