Man Group Plc, the world’s biggest publicly traded hedge fund, sold its claims on failed investment bank Lehman Brothers Holdings Inc. to a unit of Seth Klarman’s Baupost Group LLC for $456 million.
Baupost’s Hutchinson Investors LLC may pay Man Group an additional $5 million if the recovery value of the Lehman claims exceeds certain thresholds in the future, the London-based firm said in a statement today. Man Group is selling the Lehman claims for 32 percent more than their $346 million value at the end of June, according to the statement.
Man Group acquired the Lehman liabilities from investment funds run by GLG Partners LP, the London-based hedge fund manager the firm bought for $1.6 billion in October 2010. Man Group said it will use the proceeds from the sale to Hutchinson to bolster regulatory capital. Analysts including Daniel Garrod of Barclays Plc raised concerns last month that Man Group’s capital cushion was deteriorating.
Selling the Lehman claims will boost Man Group’s regulatory capital by about $140 million, Philip Middleton, a London-based analyst at Bank of America Corp., who has a buy rating on the company, wrote in a note to clients. Man Group had $500 million of surplus capital at the end of September, down from $704 million three months earlier, it has said.
Man Group fell 1.95 pence, or 2.6 percent, to 71.80 pence in London, valuing the company at 1.3 billion pounds ($2.1 billion). The stock has slumped 50 percent over the past year after clients pulled money from the company’s hedge funds and its biggest investment pool posted losses.
Lehman collapsed in September 2008, triggering a global credit freeze that led to the worst financial crisis since the Great Depression in the 1930s. The New York-based company exited bankruptcy in March and has been selling assets to try and meet former clients and creditors’ claims. GLG Partners used Lehman as a prime broker to its hedge funds.
Klarman, 55, started Boston-based Baupost in 1983. The firm oversees about $25 billion and is known for investing in distressed debt.