Investors who bought insurance meant to mitigate losses from Sears Holdings Corp.’s bankruptcy proceedings are claiming that a hedge fund that sold the insurance is improperly influencing market proceedings, according to a letter seen by Reuters.
According to the letter, Cyrus Capital Partners LP attempted to “torpedo” a planned auction for corporate bonds on Tuesday, agreeing to testify by order of an insolvency court that would disqualify bonds on credit bonds for Sears.
By selling the insurance, Cyrus prevented Sears from filing bankruptcy. Investors with their names in the letter correctly stated that Sears would apply for bankruptcy. It was unclear whether investors could buy their insurance from Cyrus or another company.
The letter was delivered by lawyers to the International Clearing and Derivatives Association (ISDA) committee on Tuesday, which supervised the market for investors. Later Tuesday, ISDA determined that bonds will be included in an article published on its website.
Sears and Cyrus refused to comment.
The results of bond auctions could not be determined immediately.
Revenue from the sale of the notes will help finance an account for Sears, which is designed for expenses that can help Sears stay in business. The company filed for bankruptcy protection in October.
Over $ 4 billion in assets under management, Cyrus sold a kind of credit insurance to investors, which he believes would be Sears’ bankruptcy application. Cyrus could now be hooked to pay millions of dollars, because the subject was special and he asked not to be named.
Investors say that the credit derivatives market can be manipulated very easily, and that Hovnanian Enterprises Inc. is based on a planned refinancing earlier this year. They claim that they can lead to such situations. These actions can harm other investors.
Billionaire Leon Cooperman’s Omega Consultancy Company and Och-Ziff Capital Management Group LLC are among the major buyers of credit insurance, and believe that these hedge funds will apply for Sears’ bankruptcy.
Och-Ziff and ISDA did not send back the comments immediately.
According to the investors’ letter, Cyrus agreed with Sears to have the 125-year-old chain in the court’s decision, stating that there may be allegations of bankruptcy of bonds.
He said the public could damage his auction at the auction.
Ultimately, these movements can help Cyrus reduce his losses by misleading Sears, people added.
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