Owl Creek Asset Management LP, one of last year’s best-performing hedge-fund firms, is betting against Denmark’s sovereign bonds in anticipation of a debt crisis, according to two people familiar with the matter.
The $3.2 billion New York-based firm also bought credit default swaps on Danske Bank A/S (DANSKE), the country’s biggest lender, founder and investment chief Jeffrey Altman said last week at a conference panel discussion in Palm Beach, Florida, according to the people, who attended and asked not to be identified because the information is private.
Danes owe their creditors 321 percent of disposable incomes, a world record that Altman referenced, according to the people. One catalyst for a debt crisis may be the country’s $550 billion home loan industry, the world’s biggest per capita, which grew after cheap credit fed a borrowing spree, Altman said, according to the people.
“Analysis both from the central bank and the business ministry show that homeowners’ economy is quite robust,” Karsten Beltoft, director at the Danish Mortgage Bankers’ Federation, said by phone. “They can handle pretty large increases in interest rates, so I am not so worried about debt levels.”
Kenni Leth, a spokesman for Danske, declined to comment on the trade, saying the bank is in its silent period before the Feb. 6 publication of full-year earnings.
Owl Creek Overseas rose 49 percent last year and ranked sixth in Bloomberg Markets’ annual hedge fund ranking. Altman, who founded the firm in 2001 after working with value investor Michael Price, made money with a bet that the world’s airlines would need new jets, and he profited from owning preferred shares of Fannie Mae and Freddie Mac, the government-controlled mortgage finance firms.
Patrick Clifford, a spokesman for Owl Creek with Abernathy MacGregor Group Inc., declined to comment on the panel discussion.
Denmark became Scandinavia’s weakest economy after a housing bubble that burst in 2008 triggered a community banking crisis. Danske Bank has lost 135,000 clients in the past 16 months and customer satisfaction is the lowest in at least six years, according to pollster Voxmeter.
Denmark’s central bank Governor Lars Rohde and Finance Minister Bjarne Corydon said last month indebtedness isn’t a threat because households can tap pensions and home equity if they get into trouble. The savings are equivalent to almost 1 1/2 times gross domestic product, central bank data show.
Still, the Financial Supervisory Authority in Copenhagen is considering measures to crack down on mortgage-lending policies in an effort to tackle record debt levels, Ulrik Noedgaard, director general at the watchdog, has said.
The country, which boasts a stable AAA credit grade at Moody’s Investors Service, Standard & Poor’s and Fitch Ratings, cut its prediction for how much it will need to borrow as the budget deficit narrows. The Finance Ministry in December said it plans to borrow 112 billion kroner ($20.3 billion) in 2014, down from an August goal of 130 billion kroner.
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