GoldenTree Nets About $100 Million on Credit Suisse Turmoil

GoldenTree Asset Management made about $100 million in profit in the weeks following an emergency rescue of Credit Suisse by UBS Group AG, driven by a well-timed bet on so-called Additional Tier 1 bonds.

(Bloomberg) — GoldenTree Asset Management made about $100 million in profit in the weeks following an emergency rescue of Credit Suisse by UBS Group AG, driven by a well-timed bet on so-called Additional Tier 1 bonds.

The hedge fund bought roughly $300 million of various banks’ AT1 bonds at knockdown prices in the days after the merger wiped out $17 billion of such bonds for Credit Suisse and saw others capitulate, according to people with knowledge of the matter.

GoldenTree snapped up such bonds in an opportunistic move to capitalize on the banking industry’s disruption. It bought the notes when prices fell to a range of between 60 cents and 80 cents, one of the people said, asking not to be identified discussing confidential information. The firm wagered that the Credit Suisse drawdown pushed prices for other AT1 notes far below what the notes were worth, which paid off in the following weeks after the bonds it purchased rebounded in value.

A multicurrency index of AT1s issued by European banks returned 3.8% in May. Issuers have also redeemed a handful notes at or around face value.

The hedge fund joins a string of other asset managers who capitalized on the banking crisis in March to net significant gains. Marathon Asset Management and Varde Partners locked in large profits by betting on Credit Suisse debt.

A representative for GoldenTree declined to comment.

A legacy of the global financial crisis, AT1 bonds are the lowest ranked bank debt, producing juicy returns in good times but taking a hit when a bank runs into trouble. However, the AT1 market is reopening globally, as concerns about bank failures ease and investors become more hopeful that central banks are nearing the end of their tightening cycles.

Read More: AT1 Market Is Open Again in Europe After Credit Suisse’s Wipeout

GoldenTree, the New York-based credit trading specialist founded by Steve Tananbaum over two decades ago, manages more than $50 billion of assets, according to its website.

–With assistance from Tasos Vossos.

(Adds AT1 performance in fourth paragraph)

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