GOODMAN Group's planned tie-up with ING Industrial Fund (IIF) is...

GOODMAN Group's planned tie-up with ING Industrial Fund (IIF) is being challenged by international hedge funds.
About 33 per cent of IIF's securities have been traded since Wednesday as hedge funds including Och-Ziff Capital build their holdings to potentially block the takeover.

A further 202 million securities changed hands yesterday, bringing the total number traded to 849.5 million in three days.

Industry sources said the hedge funds were acting to force Goodman Group, which is leading a consortium bidding $2.5 billion for the trust, to give an assurance that holders of convertible notes would be paid out.

Hedge funds own these notes, which trade on the Cayman Islands Stock Exchange. The first tranche is due to mature in June and the second a year later.

IIF unitholders are due to vote on the offer from the Goodman-led consortium on March 17.

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With combined voting rights of more than 30 per cent, the hedge funds could block the takeover, which requires the approval of 75 per cent of unitholders.

Goodman chief executive Greg Goodman declined to comment, and a company spokesman said the bid was progressing.

Investment banking sources said Goodman had been somewhat ambiguous on the rights of the noteholders. They said Goodman had indicated it could not give the noteholders surety of redemption until after the change of control.

Market sources said the noteholders were not prepared to wait until then, but wanted a guarantee now that their notes would be redeemed.

An investment banker said noteholders were "left standing" in 2007 when Brookfield Asset Management took over Multiplex.

Sources said some of the world's best known hedge funds were involved in the buying.

Their representative, Credit Suisse, lodged a substantial holding notice yesterday, saying its holding of 11.63 per cent had risen to 13.17 per cent.

New York-based Och-Ziff separately notified the ASX that it held 135m shares or 5.21 per cent.