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CSO Partners (Citigroup) - Corporate debt

2008-02-16

Count of distinct funds: 1
Capital base: $500 million
Loss: 11% in 2007

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stories: co.uk, reuters.com

2008-02-16:

This entry is being upgraded (or downgraded, if you please) to an implosion, as Citigroup had to throw the fund a lifeline:

Citigroup has been forced to bail out one of its best-known hedge funds with a $100 million (£51 million) capital injection, in another setback for the world’s biggest financial services operator.

The banking giant has also shut the door on redemptions from CSO, a $500 million hedge fund based in Berkeley Square, London, after investors tried to withdraw almost a third of the funds. CSO specialised in the corporate credit markets.

The capital injection, which will also involve Citigroup offering new and existing investors a fee waiver to take part in a further fundraising, came after the conclusion of a dispute lasting nearly six months between the Wall Street bank and a seven-strong group of investment banks.

Read more at the TimesOnline UK article. This is needless to say not a happy turn of events for Citigroup, already reeling and in a cash crunch due to massive losses throughout the credit spectrum. While its possible CSO may continue and recover, the fact that it is doing so now back on the balance sheet of Citigroup means the fund as it once was is "imploded".

2008-02-15:

Reuters reports that Citigroup's CSO Partners, a hedge fund with approximately a half billion in assets, has suspended redemptions after investors attempted to pull approximately 30% of the fund's capital.

CSO Partners invests in corporate debt. From the article:

The fund's manager, John Pickett, left following a dispute with Citigroup executives and complaints from investors after he tried to back out from committing more than half the fund's assets to buy leveraged loans tied to a German media company, the newspaper said. That matter was settled when CSO agreed to buy $746 million of the loans at face value, though they were trading at 86 percent to 93 percent of face value, it said.

We are looking for further information on CSO Partners. If you have received any correspondence from the fund, or have any information that you could share with us, please let us know.

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Comments:

Justin at 16:14 2008-11-19 said:
Looks like our implosion call has been further justified:

Citigroup Inc (C.N: Quote, Profile, Research, Stock Buzz) is liquidating its Corporate Special Opportunities hedge fund after it lost 53 percent of its value last month, the Financial Times reported on its website on Tuesday.

The CSO fund managed almost $4.2 billion at its peak and has a net asset value of about $58 million and debt of about $880 million, the report said, citing investors.

Fund investors were not allowed to withdraw their money for about a year as the hedge fund's performance worsened, the report said. Citigroup could lose "hundreds of millions of dollars," the FT reported, citing people familiar with the matter.

http://www.reuters.com/article/email/idUSTRE4AI0YL20081119 Permalink

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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.