Hedge Fund Seeking to Void Illinois Debt Made Wager on Default
- Warlander bought derivatives that would pay if state defaults
- Lawyer confirms allegations made by Nuveen, AllianceBernstein
Photographer: John Zich/Bloomberg
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Warlander Asset Management, the hedge fund seeking to invalidate $14.3 billion of Illinois bonds, bought derivatives that will pay off if the state defaults on the debt.
An attorney for Warlander’s co-plaintiff, John Tillman, the chief executive officer of the Illinois Policy Institute, disclosed the firm’s derivative wager at a hearing in Springfield on Thursday. That confirms the assertion made by two big bond investors, Nuveen Asset Management LLC and AllianceBernstein, in a brief arguing that the case should be tossed out -- saying it raises questions about Warlander’s motives.