February 15, 2007
Tata Steel's Corus Debt Buyback Plan To Hit Hedge Funds?
Does the Tata-Corus debt buyback plan spell bad news for hedge funds? Insiders believe so. According to certain experts, Tata Steel is likely to buy back Corus debt, something that could cut the value of derivatives contracts worth billions of dollars linked to debt issued by Corus -- and cause losses for investors holding the contracts, such as hedge funds. Forbes.com reports:
Tata has indicated that it would create a bridge finance scheme to buy out Corus' current shareholders and debtors via a special-purpose vehicle that would take over Corus's assets, financed by fresh equity and new non-recourse debt, raised against Corus's cash flows. Tata's decision illustrates how corporate acquisitions can affect the value of credit derivatives.
Read more: Tata Steel's Corus debt buyback plan may hit hedge funds, others - report
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