THREE US hedge funds, including investor David Tepper's Appaloosa Management, have emerged with large chunks of Centro Property Group debt.
This, as bids close for the troubled shopping centre group's $13 billion property sell-off.
Other US hedge funds to recently buy into Centro headstock debt are believed to be billionaire John Paulson's Paulson & Co, whose assets more than doubled to $US20bn last financial year after successful plays in US bank shares, and betting against mortgage bonds in the lead-up to the global financial crisis, and Davidson Kempner Capital Management, which has bought into troubled Hollywood studio Metro-Goldwyn-Mayer's debt.
Analysts are divided on how the twists and turns of the Centro saga will play out, with some suggesting strong buyer interest in the shopping centres (currently for sale in a bid process that closes tomorrow) will result in a break up of the debt-laden $18.6bn group. Other say the presence of major US hedge funds signals a potential recapitalisation, similar to the debt-for-equity swap for the work out of Alinta Energy.
There have been estimates of up to 40 creditors in the Centro headstock, a number of which bought debt from the original bank lenders at between 46c and 60c in the dollar.
In December last year , The Wall Street Journal reported Mr Tepper's hedge fund firm had earned about $US7bn profit that year, with the legendary investor on track to earn more than $US2.5bn for himself.
Mr Tepper had bought savaged bank shares including Bank of America and Citigroup, as many investors were running for the exits. At the time, Appaloosa managed about $US12bn, making it one of the largest hedge funds in the world.
According to the Journal, the husky, bespectacled trader wears jeans and sneakers to work, and can be self-deprecating, but employees say he can quickly turn on them when angry.
He keeps a brass replica of a pair of testicles in a prominent spot on his desk, a present from former employees, and he rubs the gift for luck during the trading day to get a laugh out of colleagues. After being passed over for a partnership, Mr Tepper left Goldman Sachs to start Appaloosa in 1993.
Among those expected to lodge bids tomorrow are the competing consortiums led by Lend Lease and the other by Israel's Gazit-Globe. Also, a raft of players including local listed, wholesale and private investors and international parties are expected to make offers for the eight shopping centre portfolios, or for individual assets, while some parties will bid on portions of either the $7.3bn of Australian or $US9.2bn of US assets. However, first-round bids are indicative and non-binding, meaning the shortlisting process will push well into next year.
Centro yesterday declined to comment. Gazit-Globe said it was "actively searching for new opportunities and is looking at different opportunities in its core business throughout the world. If and when the company will have something to announce, it will report publicly as required by law."
Lend lease said it did not comment on speculation.
JPMorgan and Moelis & Co are advising Centro, with UBS looking after Centro Retail Trust.
CNP Price at posting:
14.0¢ Sentiment: ST Buy Disclosure: Held
