Michael Mauer Leaves Citi For Carl Icahn, Who Hates REITs

Michael Mauer, head of Citi's leveraged syndicate has left the TARP-laden firm to join hedge fund Icahn Associates. Mauer, who was hired in 2001, had previously worked at JP Morgan where he ran the syndicated loan business before the JPM-Chase merger. Mauer's departure comes as Icahn's hedge fund is focusing more on distressed debt opportunities.

Icahn associates, which has returned 4.1% in the first quarter of 2009, and 2% since inception in November 2004, disclosed that its long credit exposure was 52%, with short credit accounting for 10%, resulting in a net credit exposure of 42%. The bulk of Icahn's debt holdings are secured positions (34%) with the balance (18%) in unsecured. In his May 1st investor letter, Carl said:

We anticipate increasing our credit book to take advantage of the “once in a generation” opportunities that we discussed at our Investor Meetings in March. We expect to manage the credit book in a manner similar to how we have invested on the equity side historically, building concentrated core positions in a few credit names while keeping our sector exposure diversified.

In the equity realm, Icahn was relatively flat, having 49% long exposure and 40% short exposure, for 9% net equity exposure. Amusingly, Icahn, just like any other rational investor with half a brain had this to say about REIT opportunities:

As we said in last quarter’s letter, we implemented the short REIT exposure in the fourth quarter, both as a hedge against our long credit exposure, as well as a way to express our view that commercial real estate faces significant deflationary pressures. We continue to believe that REIT values will be hurt due to the sector’s inability to access capital, monetize real estate holdings and grow operating income.

Icahn's core holdings include Yahoo!, Motorola, Biogen, Amylin in equity, and TXU, Harrah's, Realogy and Tropicana in debt. Sphere: Related Content

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Have Icahn And Howard Marks Loaded Up On MGM Mirage CDS?

Such is the conclusion based on a Bloomberg article that notes that MGM Mirage is being pressured by none other than Icahn and Oaktree Capital. According to Bloomberg, "Icahn and Oaktree purchased hundreds of millions of dollars of MGM Mirage bonds and have told the company it should overhaul its debts in bankruptcy, the Wall Street Journal reported, citing unidentified people familiar with the matter. The investors contacted the company last month to say bankruptcy is the best option, the newspaper reported."

Neither the WSJ nor Bloomberg mention the possibility that the two distressed investors may have loaded up on bad, evil, terrorist-even CDS and are hoping to get cashed out that way. Observant readers point out that as recently as this past week, the MGM net notional exposure went from $1.4 billion to $4.1 billion per DTCC: if any regulators still care about something more than killing equity shorts, this may be worth their invaluable time.

MGM's CDS is currently trading 49/51 upfront, or roughly 3,200 bps running. The CDS hit a wide of over 8,000 bps on March 8, indicating what the profit potential is to holder of CDS. Of course, MGM Mirage has options in dealing with CDS-armed "terrorizers" (Zero Hedge would be happy to discuss these with pa Kirk) and avoid getting forced into a bankruptcy by distressed negative-basis loaded banditos. Alternatively, 1yr/5yr flatteners here may seem oddly attractive for ballsy accounts.

Lastly, Zero Hedge wants to point out it is still and always will be a big fan of the bankruptcy convergence trade in any of its gruesome incarnations. Sphere: Related Content

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