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Thursday, June 21, 2007

Omp, Omp, Omp, And Another One Bites The DUST!

Update: Brookstreet also? See Calculated Risk. The problem is a hefty drop in collateralized mortgage obligations bought on margin. A small firm, but the problem is that a larger player revalued Brookstreet's holdings. Basically, it's a margin call and I guess they weren't able to ante up. Our stern and sad bear is cancelling the Everquest IPO. One thing's for sure, this is going to put further downward pressure on housing. Merrill Lynch apparently sold just a fraction of its BS hedge collateral, but Lehman seems to be going to move some too. Sitting at the table is getting quite expensive. End update.

This time it's Ritchie:
Hedge-fund manager Ritchie Capital Management Ltd.'s two Irish based funds filed for bankruptcy protection after losses of more than $700 million it blamed on a co-investor's alleged fraud.

Ritchie's two Dublin-based funds, Ritchie Risk-Linked Strategies Trading (Ireland) Ltd. and Ritchie Risk-Linked Strategies Trading (Ireland) Ltd. II, both sought Chapter 11 reorganization yesterday in U.S. Bankruptcy Court in Manhattan. The two petitions listed debt of $811 million. Court filings said the assets are undetermined.

The filings come almost two months after Lisle, Illinois- based Ritchie sued Coventry First LLC for allegedly misleading it about life insurance co-investments. Coventry seeks to dismiss the lawsuit, calling it a ``cheap publicity stunt'' to divert attention from Ritchie's own financial problems.
Heh, heh, heh, who woulda thunk one could lose money on this?
The two debtors were formed in 2005 to invest in the so- called life-settlement market where wealthy individuals over age 65 sell their life insurance policies for less than the death benefit and more than the cash-surrender value.

The buyer continues to pay the premiums, betting that the named-beneficiary of the policy will die soon enough to make a profit.
Words fail me. See the post below. The economy's quite weak and the financial unwind is slowly gaining strength. T-Bills have never looked so good to me.


Comments:
If that's the Ritchie guy who started CRT in Chicago many years ago, we should be scared. He's a pretty sharp guy.
 
The guy who started Ritchie capital is the adopted (step?) son of Joe Ritchie, one of the Ritchie brothers who started CRT and a Market Wizard inductee. Joe had no part of management at Ritchie Capital.
 
Saved!! I was pretty sure it wasn't Ritchie Sr, because he wouldn't do the life insurance thing. I'm sure it seemed like a good idea at the time, but in general the person assigning his own life insurance is going to have by far the best idea as to the probability of payoff. So the only times this works is when the person who has the policy is strapped for cash.
 
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