How a Hedge Fund Made $100 Million From New Jersey’s Desperation

[marmar]

TRENTON, N.J. 2013 When state Treasurer Andrew Sidamon-Eristoff briefed lawmakers on New Jersey’s ailing budget in April, he brought good news. His office had just raised a welcome $92 million thanks to a deal that bailed out two bond issues headed for default.

New Jersey had no legal obligation to make good on the debts, which were backed by payments from a national settlement with the nation’s leading tobacco companies. But Sidamon-Eristoff said the bailout was a “no brainer” because it protected the state’s reputation with lenders and raised badly needed cash.

An examination of this transaction by ProPublica shows that the argument for the deal was far from clear cut. As it bailed out bond investors, New Jersey traded away an estimated $400 million in future tobacco revenues that would have flowed into state coffers starting in 2017.

One undeniable winner, however, was Claren Road Asset Management, a New York hedge fund that walked off with more than $100 million in profits from its investment in the debt, according to interviews with deal participants, an analysis of the bonds’ trading data and previously undisclosed public records. .................(more)

The complete piece is at: http://www.truthdig.com/report/item/how_a_hedge_fund_made_100_million_from_new_jerseys_desperation_20141230

[Adam051188]

1. livin the dream baby

[Divernan]

2. How did Marc Mezvinsky's hedge fund miss out on this?

Ah well, as the article points out, there are many, many other similar opportunities out there for 2nd generation grifters to rip off the gullible. Like father, like son. Apple, meet tree. Marc's father, Ed Mezvinsky, a former U.S. representative from Iowa, pleaded guilty in 2002 to cheating dozens of investors out of $10 million.

In March 2001, Mezvinsky was indicted and later pleaded guilty to 31 of 69 counts of bank fraud, mail fraud, and wire fraud.

Ed Mezvinsky embezzled more than $10 million dollars from people via both a Ponzi scheme and the notorious Nigerian e-mail scams. He was found guilty and sentenced to 80 months in federal prison.

After serving less than five years in federal prison, he was released in April 2008 and remains on federal probation. To this day, he still owes $9.4 million in restitution to his victims..
http://vidrebel.wordpress.com/2014/02/19/do-you-know-edward-ed-mezvinsky/

Moving on to the 2nd generation of Mezvinsky financial wheeler dealers, son Marc and his 2 partners, all ex-Goldman Sachs Group Inc. proprietary traders/graduates, have profiteering, barely legal speculations down to a fine art. Y'all know Goldman-Sachs, right? The folks who paid Hillary $400,000 in one week for a couple of speeches? http://www.dailykos.com/story/2013/11/14/1255675/-Goldman-Sachs-Pays-Hillary-400-000-in-One-Week

The world's most powerful investment bank is a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money. In fact, the history of the recent financial crisis, which doubles as a history of the rapid decline and fall of the suddenly swindled dry American empire, reads like a Who's Who of Goldman Sachs graduates.

Read more: http://www.rollingstone.com/politics/news/the-great-american-bubble-machine-20100405#ixzz3NUOiPstK
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Ex-Goldman Sachs Group Inc. (GS) proprietary traders Bennett Grau and Mark Mallon are teaming up with former colleague Marc Mezvinsky to start a hedge fund, according to a person with knowledge of their plans.

The three are raising money for their new firm, Eaglevale Partners LP, which plans to start trading in the first half of 2012, said the person, who asked not to be identified because the information is private. The fund will employ a global macro strategy, seeking to profit from economic trends by trading securities from bonds to commodities.

http://www.bloomberg.com/news/2011-11-29/former-goldman-traders-grau-mallon-are-said-to-start-fund-with-mezvinsky.html

[jehop61]

4. And your point is?

[dixiegrrrrl]

3. Seems to be a widespread practice.

I read that Ireland did the same thing...paid off a debt they did not legally owe and got ripped off.

[xchrom]

5. du rec.

[econoclast]

6. To be fair ...

These crazy tobacco settlement bonds were cobbled together in 2002 by then Governor of perpetually broke New Jersey - Jim McGreevey. They were used to fund a 3 billion dollar budget gap. But they were issued amidst allegations of corruption and pay-to-play via some unsavory Philadelphia folks. Apparently some big McGreevey donors who didn't ordinarily get bond work from NJ suddenly showed up as part of the deal. And the bonds required special dispensation from the NJ Supreme Court because NJ's Constitution prohibits borrowing to fund ongoing operations. It was a real cluster - f---

At the end of the day they raised 3 billion dollars but forfeited 100% of NJ's 250 to 300 million dollars a year in Tobacco Settlement money.

They got renegotiated in 2012. Maturity extended but NJ only had to part with 75% of the Tobacco settlement money.

THAT 25% that NJ renegotiated in in 2012 is the money thet are now using today to finally put this mess out of our misery.

Think of it this way. NJ is now back to McGreevey's original 100% of Tobacco Settlement money payout to the bondholders ... So NJ is no worse off than it was during the inital McGreevey deal. BUT they get 92 million dollars today (which they need 'cause they are still perpetually broke) AND they mature the deal in 2023 - years earlier than scheduled! Which means that they get to start pocketing some Tobacco money years ahead of the original McGreevey timetable and get paid 92 million to do it.

So...given that they were already saddled with this dead horse ... They got out pretty well.

Why not just default? Because if they defaulted the bondholders are entitled to keep collecting whatever Tobacco money there IS until they get paid in full!

[countryjake]

7. Kick & Recommended!