Elliott Management Corporation

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Elliott Management Corporation
Type Holding company
Industry Hedge funds
Founded New York City
1977
Founder(s) Paul Singer
AUM IncreaseUS$ 23 billion (2013-2014)
Website Elliottmgmt.com

Elliott Management Corporation is the management affiliate of US hedge funds Elliott Associates L.P. and Elliott International Limited. Elliott was founded by Paul Singer, who also serves as CEO of the management company, which is based in New York City. From inception, Elliott has generated for its investors a 14.6% net compound annual return, compared to 10.9% for the S&P 500 stock index, and now has more than US$23 billion in assets under management.[1][2] Elliott's portfolio, led by Delphi Automotive and BMC Software, was worth $3,271,965,000 in the third quarter of 2012.[3]

Overview[edit]

Paul Singer created Elliott Associates in January 1977,[4] starting with $1.3 million from friends and family. In its earliest years, the firm focused on convertible arbitrage. However, since the 1987 stock market crash and early 1990s recession, the firm has focused primarily on distressed debt investing.[5] Elliott Associates manages $8.6 billion and is Elliott Management's primary domestic fund.[6]

Elliott is noted for its relatively high returns and low volatility. The New York Times has called Paul Singer ‘one of the most revered’ hedge fund managers on Wall Street. Elliott returns have generally outpaced the annual growth of the S&P 500. From inception, Elliott has generated for its investors a 14.6% net compound annual return, compared to 10.9% for the S&P 500 stock index,[7] while having only one-third of the index's volatility.[8] The firm is currently closed to new investors. As of mid-2008, Elliott counted 175 employees in New York, London, Tokyo and Hong Kong[5] and is one of the oldest hedge funds under continuous management.[9]

Affiliates and units[edit]

  • Kensington International Ltd. is a subsidiary of Elliott Management.[12]
  • Maidenhead LLC and Warrington LLC are US entities that are completely controlled by Singer.[13]
  • Elliott Advisors (UK) Ltd. is “a London-based advisor to Elliott.”[14]
  • Elliott Advisors (HK) Limited is “the Hong Kong arm of Elliott Management.”[15]

Investments[edit]

Early in its history, Elliott focused on convertible arbitrage, refocusing primarily on distressed debt investing following the 1987 stock market crash and early 1990s recession. Elliott is known for working hard to restructure such U.S. firms as TWA, MCI, WorldCom, and Enron as well as overseas companies including Telecom Italia SpA and Elektrim.

In 2003, Elliott believed P&G was not offering a fair price to all preferred shareholders for German hair products company Wella AG. Elliott joined other funds in opposing the deal, including Germany's second-largest fund manager, Deka Investments. After several years of legal and shareholder battles, P&G raised its offer for Wella AG for all preferred shareholders.[5] According to the Borsen Zeitung, Elliott said its goal was to "protect the rights of minority shareholders."[16]

In April 2005, Wisconsin-based retail chain Shopko announced that it had agreed to be acquired for approximately $1 billion by a private equity firm at a price of $24 per share.[17] This and a subsequent offer at $25 were rejected, according to the Milwaukee Business Journal, "after several dissident shareholders threatened to vote down the transaction, claiming the bid was too low." Elliott joined other hedge funds in opposing the sale because the price was too low and had concerns about conflicts of interests on the board.[18][19] Elliott eventually participated in purchasing ShopKo at $29 per share.[20]

Human resource consulting company Adecco announced in January 2006 it had secured a 35 percent stake in DIS AG, at a price of €54.5 per share, making an offer at that price for all shares.[21] The company also announced that the DIS CEO and CFO had signed lucrative management agreements that eventually would make them CEO and CFO, respectively, of Adecco.[22] Adecco attempted to de-list DIS but was blocked in court by a number of hedge funds, including Elliott. The funds also raised concerns about conflict of interest by the CEO and CFO. Eventually Adecco offered €113 per share, which was accepted.[21]

In March 2010, Elliott bid $5.75 per share for software company Novell. Although Novell rejected the offer, Elliott "welcomed" their decision to conduct a sale of the company.[23]

In December 2011, it was reported that Elliott was suing the Vietnamese shipbuilding firm Vinashin in a British court. The company had defaulted a year earlier on a $600 million loan backed by the Vietnamese government, then offered to pay bondholders 35 cents on the dollar. Elliott sued for the full amount.[24]

It was reported in December 2012 that Elliott, which already had an 8% stake in Compuware, had offered to buy the company for $11 a share in cash.[25]

In late 2012, Elliott criticized the oil company Hess for its use of capital and for being “distracted” from oil exploration and production by other activities. In January 2013, Elliott called on Hess to sell certain assets and asked Hess investors to vote for five new directors as part of an effort to reconfigure the oil firm and thus boost its share price.[26] “Buried within Hess Corp. is one of the premier U.S. resource play-focused companies,” Elliott wrote.[27] In March, Hess announced that it was acting on some of Elliott's suggestions, but Elliott said that Hess's changes fell far short of what was needed.[28] In April, it was reported that Hess would close its London office on Elliott's advice.[29]

In summer 2014, Elliott disclosed a 6.7% stake in Interpublic Group of Companies, an ad agency, and "a person briefed on the matter said Elliott planned to call on the company to sell itself to one of its competitors".[30]

Sovereign debt deals[edit]

A portion of Elliott's distressed securities trading has been in sovereign debt, most recently Argentina in 2012 (see Ghana incident) and Republic of Congo. Elliott is well known for its investment in the distressed debt of Peru. Elliott aids in the fight against government corruption by "exposing in court the corrupt networks of government officials, providing a much-needed check on mineral-rich states." When nations win debt relief without being held more accountable, they are more inclined to repeat the same mistakes and end up in debt once again.[31]

Argentina[edit]

After Argentina defaulted on its sovereign debt in 2002, Elliott, which owns Argentine bonds, with a nominal face value of $630 million which are now worth $2.3 billion and refused to accept Argentina's offer of less than 30 cents on the dollar.

Elliott has since won judgments against Argentina in various US and UK courts but has not yet collected payment. In October 2012, an Elliott subsidiary, NML Capital, arranged for the seizure in Ghana of the ARA Libertad, a $10 million, 3,700-ton Argentinian naval vessel with a crew of over 200, which it intended to confiscate in accordance with court judgments awarding it over $1.6 billion in Argentinian assets.[32][33]

Argentina's Foreign Affairs Minister, Héctor Timerman, condemned Singer in a November 2012 Huffington Post piece as a “scavenger” and, apropos of the seizure of the ARA Libertad, charged that “a piece of Argentina's national patrimony has been detained, in clear violation of international law.” Timerman said that while Argentina “will pay the overwhelming majority of debt holders, who have agreed to a debt swap that has contributed to Argentina's recovery,” it “will not reward loan sharks who bought defaulted bonds for next to nothing and have refused a deal that would have represented a clear profit, asking much more, even several times the amount they spent.”[11]

A November 2012 trial, which ended in a ruling by the New York Second Circuit Court of Appeals in favor of NML and against Argentina, was described by legal experts as the “sovereign debt trial of the century.” On 28 March 2013, the New York Post reported that Argentina was given a 29 March 2013 deadline to present a new payoff plan to NML Capital.[34] When the new plan proved to be essentially identical to previous offers, Kirchner was accused of “thumb[ing] her nose at the US court system—setting up a legal showdown that could result in another default on the country’s debt.”[35][36]

As a result of the dispute with Elliott, reported the Seattle Times, “Argentina's shaky economy hangs in the balance.”[37] In April 2013, the New York court gave NML three weeks to respond to Argentina's offer.[38] On 5 April it was reported that NML was expected to reject Argentina's latest settlement offer, “potentially leaving Buenos Aires with a huge bill.”[39] In a letter published in the Financial Times on 7 April, legal experts Andreas F. Lowenfeld and Peter S. Smedresman refuted Argentina's arguments and defended NML's position.[32] On 15 April, Bloomberg reported that Argentina might “get a U.S. Supreme Court hearing in its legal battle with a hedge fund seeking to collect $2.5 billion owed by the South American country on defaulted bonds.”[40]

In March 2013, Argentina offered a new plan that was judged unlikely to be acceptable to the New York court.[41] On August 23, 2013 the U.S. Court of Appeals for the Second Circuit affirmed the lower court's verdict and dismissed the plan.[42] Jay Newman, senior portfolio manager at Elliott, called the Argentina's numbers "a complete fabrication" and reiterated its history of providing inaccurate economic statistics to the US government.[43]

Congress has urged the Justice Department to not side with Argentina in the case in support of Elliott. Argentina claims that the case tests the ability of the United State's court systems to "compel foreign countries to honor their financial obligations".[43]

Argentina has spent a substantial amount of time detailing the price at which Elliott bought its debt and the profit it would make if it got its proposed $750 million. Elliott's actions were not in any way illegal.[44] Elliott Management states that Argentina, because of its surplus in natural resources, "has recovered from its financial troubles and can afford to pay the fair value of the debt."[43]

Congo[edit]

Elliott exposed corruption in Republic of Congo in its efforts to enforce judgments totaling more than $100 million in defaulted bank debt.[45][46] In 2008, Elliott Management bought $32.6 million in loan debt incurred by the Republic of Congo, allegedly for less than $2.3 million.[47][48] In 2002 and 2003, a British Court awarded Elliott Management more than $100 million for these debts, $39 million of which was subsequently recouped by interception of proceeds of the sale of oil by the Congo to Glencore International, a Swiss commodities and raw materials supplier.[49] Elliott states that it only targets countries that can afford to pay, but have decided not to, and has emphasized its efforts to root out corruption in countries like the Republic of Congo.[9] Brice Mackosso, a campaigner for greater transparency and anti-corruption in the Congo Republic's government, stated that "if it were not for these vulture funds, we would not know any facts about the way our country’s wealth is being taken away. We don’t agree with their ultimate aims, but they are the only ones capable of exposing the truth.”[31]

After Elliott's investigations produced evidence of corruption, the government eventually settled for an estimated $90 million on debt for which Elliott paid less than $20 million. [50]

Peru[edit]

In 1995, Elliott bought $20 million face value of defaulted Peruvian bank debt. After extensive and costly litigation and numerous attempts by Elliott to settle, the court awarded $58 million to Elliott, including past due interest.[51]

See also[edit]

References[edit]

  1. ^ Carreyrou, John (11 February 2013). "Hedge Funds Clash Over Argentina Debt". Wall Street Journal. Retrieved 14 February 2014. 
  2. ^ Elliott Management. "Elliott Management Releases ISS Presentation". Yahoo! Finance. Retrieved 12 June 2013. 
  3. ^ Insider Monkey. "Hedge Fund - Elliott Management". Retrieved 12 June 2013. 
  4. ^ "Company Overview of Elliott Management Corporation". Businessweek. Retrieved 31 May 2013. 
  5. ^ a b c Foroohar, Kambiz (February 2008). "The Opportunist". Bloomberg Markets. Retrieved 3 October 2010. 
  6. ^ Copeland, Rob (7 July 2014). "Elliott Associates Hedge Fund Gained 4.6% in First Half". Wall Street Journal. Retrieved 16 July 2014. 
  7. ^ Elliott Management Corporation, retrieved 3 October 2010 
  8. ^ Salmon, Felix (February 2004), "Elliott Associates' aggression captures low-risk returns", Euromoney, retrieved 3 October 2010 
  9. ^ a b Barr, Alistair (11 December 2009), Hedge fund giant Elliott ramps up in wake of credit 'party', retrieved 3 October 2010 
  10. ^ SEC. "Proxy Statement". UNITED STATES SECURITIES AND EXCHANGE COMMISSION. Retrieved 13 June 2013. 
  11. ^ a b Timerman, Hector (14 November 2012). "Africa and Latin America Still Fight Vulture Funds". Huffington Post. Retrieved 12 June 2013. 
  12. ^ The Guardian (15 November 2011). "Vulture funds – the key players". London: The Guardian. Retrieved 13 June 2013. 
  13. ^ MEDION AG (18 May 2012). "MITTEILUNGEN ÜBER STIMMRECHTSANTEILE AN DER MEDION AG". Retrieved 13 June 2013. 
  14. ^ Elliott Advisors (5 July 2012). "ELLIOTT ADVISORS (UK) LIMITED". Reuters. Retrieved 13 June 2013. 
  15. ^ Holland & Knight. "Bruce W. MacLennan Bio". Retrieved 13 June 2013. 
  16. ^ Waxley, Simon; Tuil, Frank (2 February 2005), "Rights for All – How the Fight for Wella is a View of the Future", Borsen-Zeitung 
  17. ^ "New bidders propose $26.50 per share for ShopKo" (Press release). The Business Journal of Milwaukee. 3 October 2005. Retrieved 3 October 2010. 
  18. ^ "Elliott Files Schedule 13D Disclosing Substantial ShopKo Ownership; Strongly Opposes Current Offer for the Company" (Press release). PR Newswire. 6 September 2005. Retrieved 3 October 2010. 
  19. ^ Hajewski, Doris (7 September 2005), "ShopKo sale may be in danger", Milwaukee Journal Sentinel, retrieved 3 October 2010 
  20. ^ "ShopKo agrees to $29 a share offer from Sun Capital", The Business Journal of Milwaukee, 18 October 2005, retrieved 3 October 2010 
  21. ^ a b "Permission given to Adecco to Delist DIS", Borsen-Zeitung, 12 June 2008 
  22. ^ "German DIS Minority Shareholders Oppose Swiss Parent Adecco", German Business Digest, 21 April 2006 
  23. ^ Savitz, Eric (22 March 2010). "Novell: Elliott "Welcomes" Decision To Consider Possible Buyers". Retrieved 3 October 2010. 
  24. ^ Luochang Yu, Bob (13 December 2011). "Elliott Associates Is Suing Vietnam-based Vinashin". Retrieved 13 June 2013. 
  25. ^ Savitz, Eric (17 December 2012). "Compuware Gets $11/Shr Bid From Elliott Management". Forbes. Retrieved 13 June 2013. 
  26. ^ DEALBOOK (29 January 2013). "Elliott Management Calls for Board Shake-Up at Hess". The New York Times. Retrieved 13 June 2013. 
  27. ^ WSJ (29 January 2013). "Activist Investor Elliott Management Seeking to Remake Hess". Wall Street Journal. Retrieved 13 June 2013. 
  28. ^ BusinessWire (4 March 2013). "Elliott Management Responds to Hess Corporation Shareholder Letter and Presentation". Retrieved 13 June 2013. 
  29. ^ Telegraph (3 April 2013). "London Office Closure". The Daily Telegraph (Business Section). p. 3. Retrieved 12 June 2013. 
  30. ^ de la Merced, Michael J., "Paul Singer Takes Stake in Advertising Titan Interpublic and Pushes for Sale", New York Times, July 24, 2014. Retrieved 2-014-07-24.
  31. ^ a b Polgreen, Lydia (10 December 2007). "Unlikely Ally Against Congo Republic Graft". New York Times. Retrieved 16 October 2013. 
  32. ^ a b Jones, Sam (5 October 2012). "Singer banks on the full force of law". Retrieved 13 June 2013. 
  33. ^ Whitehouse, Kaja. "Argentina says 'Arrh, no!' to Paul Singer’s $20 million demand for seized ship". New York Post. Retrieved 13 June 2013. 
  34. ^ Celarier, Michelle. "Cristina’s crumble: Argentina prez may offer Singer deal". New York Post. Retrieved 13 June 2013. 
  35. ^ Van Voris, Bob. "Argentina ‘Greek Tragedy’ Nears End as Debt Ruling Looms". Bloomberg Businessweek. Retrieved 13 June 2013. 
  36. ^ Celarier, Michelle. "Argentina sticks to its guns on debt payout". New York Post. Retrieved 13 June 2013. 
  37. ^ Warren, Michael. "Argentina defends payment plan; analysts trash it". Retrieved 12 June 2013. 
  38. ^ Raymond, Nate (2 April 2013). "UPDATE 2-US court demands Argentine bondholders address pay plan". Reuters. Retrieved 11 June 2013. 
  39. ^ Andrade, Mariano (5 April 2013). "Court decision looms in Argentine debt showdown". Agence France-Presse. Retrieved 11 June 2013. 
  40. ^ Stohr, Greg (15 April 2013). "Argentina May Get U.S. High Court Hearing in Bond Case". Bloomberg L.P. Retrieved 13 June 2013. 
  41. ^ "Argentina offers to pay debts with cash & bonds."
  42. ^ UNITED STATES COURT OF APPEALS, FOR THE SECOND CIRCUIT (23 August 2013). "12-105(L) NML Capital, Ltd. v. Republic of Argentina". Clarin. Retrieved 23 August 2013. 
  43. ^ a b c Hamburger, Tom (12 July 2013). "Justice Department may weigh in on battle royale between hedge funds and Argentina". Washington Post. Retrieved 16 October 2013. 
  44. ^ Salmon, Felix. "Argentina’s desperate exchange proposal". Reuters. Retrieved 16 October 2013. 
  45. ^ The Debt Frenzy, Foreign Policy, July/August 2007
  46. ^ The Debt Frenzy, MyWire, 1 July 2007
  47. ^ "Frigate Libertad: Vulture Funds and Cabin Fever in West Africa". The Argentina Independent. 14 November 2012. Retrieved 18 July 2014. 
  48. ^ "Vultures of Profit: Judgments Totaling $996M from 11 Countries, including Cameroun Republic". Frontier Telegraph. 24 June 2008. Retrieved 10 June 2012. 
  49. ^ Foroohar, Kambiz (8 January 2008). "Vulture Fund Founder Singer Helps Back Giuliani Bid (Update1)". Bloomberg. Retrieved 10 June 2012. 
  50. ^ Celarier, Michelle. "Mitt Romney's hedge fund kingmaker". CNN. Retrieved 13 June 2013. 
  51. ^ Bosco, David (11 June 2007), "The Debt Frenzy", Foreign Policy, retrieved 3 October 2010 

External links[edit]