The Hedge Fund Implode-O-Meter News Pick-ups: Imploded: Ritchie Capital Management

Ritchie Capital Management - Life insurance

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2007-06-21

Count of distinct funds: 2

Ritchie Capital Management (website), a fund founded in 1997 by Thane Ritchie, sought bankruptcy protection for two Dublin, Ireland-based funds that lost more than $700 million on investments in life insurance settlements. According to a June 21 Bloomberg article:

The hedge-fund manager asked the U.S. Bankruptcy Court in Manhattan to approve a $17 million interim loan from ABN Amro Holding NV as part of $30 million in financing for the funds. They owed ABN Amro $436.5 million as of April 30, Lisle, Illinois-based Ritchie said in court filings yesterday.

The bankruptcies follow a May 2 lawsuit in which Ritchie accused Coventry First LLC, its partner in the insurance investments, of concealing a government investigation into fraud against policyholders. The firms jointly bought life-settlement plans -- bets that insurance payouts will exceed the premiums. ...

The Chapter 11 filings cover Ritchie Risk-Linked Strategies Trading (Ireland) Ltd. and Ritchie Risk-Linked Strategies Trading (Ireland) Ltd. II. They listed debt of $811 million and an unspecified amount of assets.

The funds were formed in 2005 to invest in life- settlements, where wealthy individuals over age 65 sell their policies for less than the death benefit and more than the cash- surrender value. The buyer continues to pay the premiums, betting that the named-beneficiary of the policy will die soon enough to make a profit.

The Ritchie companies bought policies from Coventry and its affiliate LST I LLC, intending to profit either from a securitization or from collecting death benefits.

Ritchie said it was sold "non-conforming" policies by Coventry and its affiliate LST I LLC, which prevented them from being securitized. That led to a "precipitous decline" in the funds' assets that Ritchie said eventually led to its bankruptcy filing.

Curiously enough, Coventry has filed a request to purchase the assets of the two imploded funds from Ritchie Capital.

Comments:

Krellan at 05:30 2008-07-02 said:

http://online.wsj.com/article/SB121495893887021511.html

Here's what appears to be a long narrative story about an imploded hedge fund, Ritchie Capital Management, #3 on the list. Unfortunately I don't have a WSJ subscription, so can't see the entire text. Permalink

Aaron at 19:29 2008-07-05 said:

Here's a free blurb:

http://www.reuters.com/article/email/idUSN0130700420080702

I am researching them for an ailing post so I will post more if I find anything.

Interestingly, Ritchie was fined $40M earlier in the year by the SEC for illegal "late trading"

http://www.sec.gov/news/press/2008/2008-10.htm Permalink

Aaron at 19:59 2008-07-05 said:

admin note: I've merged this topic into the "official" Ritchie (autopost) topic, appearing on the new ailing entry I just put together (see link at the top of this topic). 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.