Coffey Haunts GLG’s Investors as Sibanthracite Pulls IPORuth David, Jesse Westbrook and Yuliya Fedorinova
GLG Partners Inc.’s attempt to mitigate losses from former hedge-fund manager Greg Coffey’s bet on a Siberian coal mining company was dealt a blow after Sibanthracite Plc pulled its initial public offering.
The GLG Emerging Markets Growth Fund, a pool created to run down assets acquired by Coffey, had sought to raise as much as $214 million by selling its 25 percent stake in the IPO. The fund, now part of London-based Man Group Plc, will try to find an industrial buyer for the holding, its biggest asset, two people with knowledge of the matter said on July 12.
The investment was one of Coffey’s last before he resigned from GLG in April 2008 following a run of gains that made the Australian one of the world’s best-paid hedge-fund managers. Investors were left with the stake in the coal mine after GLG moved the fund’s hardest-to-sell assets into a segregated fund and initially barred redemptions as Coffey resigned. The firm tried to take Sibanthracite public as growing concern that China’s economic growth is slowing sent coal prices tumbling.
“GLG bought Sibanthracite’s stake under previous management and at a quite high valuation,” said George Buzhenitsa, a metals and mining analyst at Deutsche Bank AG in Moscow. Declining coal prices will make it tougher to sell the stake, Buzhenitsa said.
Russian businessman Dmitry Bosov’s Alltech Investments Ltd. controls Novosibirsk, Russia-based Sibanthracite and hadn’t filed to sell shares in the IPO. A spokesman for Sibanthracite declined to comment. Coffey didn’t return an e-mail.
Sibanthracite said on July 12 that “market conditions and investor sentiment towards the global mining sector” prompted the IPO to be scrapped, even amid “significant interest and positive feedback.”
GLG allowed investors to get their money back in 2011 through an auction in which they could sell their stakes in the fund that held the mine, investors told Bloomberg News at the time. The price offered would have resulted in clients losing about 80 percent of their initial investment, they said.
“GLG was trying to sell the stake on the market as it probably had no options to sell it to anyone directly,” said Kirill Chuyko, the Moscow-based head of equity research at BCS Financial Group. Finding a buyer will be difficult given Bosov would retain control of the coal miner, he said.
Man Group, the world’s biggest publicly traded hedge-fund manager, acquired GLG in 2010 for $1.6 billion. Its shares fell 1.5 percent to 90.60 pence as of 8:33 a.m. in London.
“The IPO was not designed solely as a way for GLG to exit,” Sibanthracite said in a statement. “Sibanthracite’s shareholders had always planned to take the company public and market-oriented. An IPO is not the only opportunity for the fund to exit this investment. Further decisions regarding GLG’s investment in Sibanthracite will be made jointly by the shareholders based on their mutual interests and the interests of the company.”
Coffey, 42, who last year left the hedge-fund industry after losing money for two years, had his net worth estimated at 260 million pounds ($393 million) by the Sunday Times Rich List in April.
When Coffey quit to join Louis Bacon’s Moore Capital Management LLC, GLG shares tumbled. He had been GLG’s top performer, managing $7 billion and winning industry awards after his main fund climbed 51 percent in 2007 and 60 percent in 2006 amid a rally in emerging markets. His expertise was macro investing, in which hedge-fund managers try to profit from large economic trends by trading interest rates, bonds and stocks.
GLG told investors in 2008 that it would limit redemptions from one of the funds Coffey had managed and side-pocket, or segregate, illiquid assets. The fund was valued at $550 million when GLG first segregated the assets five years ago, a person familiar with the matter told Bloomberg News in May 2011.
Clients have to wait until managers sell assets in side pockets before they can get their money back. Another option is selling an illiquid hedge-fund stake on the secondary market to a new investor.
JPMorgan Chase & Co., Morgan Stanley, Raiffeisen Bank International and Sberbank CIB managed Sibanthracite’s IPO. It would have been the first Russian company to tap U.K. stock investors this year after railroad-freight carrier NTS Holding Plc postponed a London IPO of up to $500 million in January.