Deep Thoughts From David Einhorn

Another fund manager whose investment decisions we respect, absent his occasional entanglements in groupthink short squeezes.


Greenlight_Capital_-_Q1_2009 - Free Legal Forms

Hat tip KGB 666
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Third Point Drops 3% In March, Einhorn Up 4.5%

The ridiculous market moves in March have dealt Dan Loeb a tough hand, causing Third Point to lose 3.1%, bringing its YTD performance to -1.5%. The 8.8% run up in the S&P will spare few hedge funds and as the performance letters start rolling in, I expect to see much more pain for managers who did not flip shorts fast enough, or got caught in the Citi arb.

In the meantime, seven card stud David Einhorn and his Greenlight are rocking it with a 4.5% return in march and a 5.5% return for Q1. Among his profitable positions reader anonymous speculates were his VMware short and EMC long, and of course his big time bet in GLD and GDX. On the losing side are likely Arkema and Criteria Caixa.

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Victory for Einhorn: Allied Capital In Default

After seemingly endless years of wrangling back and forth, Einhorn has finally been vindicated: Allied Capital announced in an 8K today that it was notified by its lenders of a default in its credit facility, an event which will severely hamper the company's liquidity, and is the first step on the road to Allied's utter annihilation. From the 8K:

The administrative agent for the revolving credit facility has notified the Company that an event of default has occurred pursuant to the revolving credit facility. An event of default under the revolving credit facility constitutes an event of default under the private notes.
Neither the lenders nor the noteholders have accelerated repayment of the Company’s obligations; however, the occurrence of an event of default permits the administrative agent for the lenders under the revolving credit facility, or the holders of more than 51% of the commitments under the revolving credit facility, to accelerate repayment of all amounts due, to terminate commitments thereunder, and to require the Company to provide cash collateral equal to the face amount of all outstanding letters of credit. Pursuant to the terms of the private notes, the occurrence of an event of default permits the holders of 51% or more of any issue of outstanding private notes to accelerate repayment of all amounts due thereunder. Acceleration of the amounts outstanding under the revolving credit facility or any issue of the private notes could have a material adverse impact on the Company’s liquidity, financial condition and/or results of operations.

The existence of an event of default restricts the Company from borrowing or obtaining letters of credit under its revolving credit facility, and from declaring dividends or other distributions to its shareholders.

One could construe this as a rather ominous sign to other BDCs including American Capital and Apollo Mezzanine.

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