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This Hedge Fund Trade Is Stirring Fresh Controversy in the CDS Market

  • McClatchy’s loan deal with hedge fund roils CDS market
  • Publisher’s deal comes as regulators step up scrutiny of CDS

It seemed like a sure-fire bet: short the debt of a highly leveraged newspaper company that’s losing money. And for a while, it worked as investors piled up almost $500 million of wagers by buying credit-default swaps on the publisher, McClatchy Co.

That is until hedge fund Chatham Asset Management stacked the deck with a deal that’s threatening to make those swaps all but worthless.