Bankruptcy

Successful Hedge Fund Operator Says Losses Will Reach 1.3 Trillion

By J. Michael McBride

John Paulson recently told a group of hedge fund managers meeting in Monaco that he expects that the losses and write downs which will follow the world wide credit crunch will reach 1.3 trillion dollars. He stated that he thinks that we are about one third of the way through this financial crisis.

Quote:
Ambac Financial Group Inc., the second-biggest bond insurer, is "the most leveraged, troubled company out there," Paulson said. It is at risk of being downgraded to non-investment grade, Paulson said. Ambac spokeswoman Vandana Sharma declined to comment.

`Deteriorate Significantly'

The housing and credit-market slump pushed Ambac to three straight quarterly losses after more than a decade of profit. It has written down $5.2 billion since the collapse of the U.S. subprime mortgage market last year.

Paulson's outlook is consistent with the view of hedge funds meeting in Monaco this week. More than 80 percent of the 1,300 fund managers, investors and service providers gathered in Monaco for the annual conference said they expect the credit crisis will continue, according to a GAIM survey. About 23 percent said the situation "will deteriorate significantly."

Bill Browder, founder and head of Hermitage Capital Management, said securities firms have a "vested interest" in claiming an early end to the crunch. "If we're in the seventh or eighth inning, this is a 100-inning game," he said.

Link:
http://www.bloomberg.com/apps/news?pid=20601087&sid=alYak4riQl0c&refer=home

Michael

Full post as published by Texas Lawyer Blog on June 18, 2008 (boomark / email).