05/08/2010 Author: Edward Dean

HFMWeek Daily Snapshot - 5 August

NEWSPAPER AND WIRES
Hedge funds have been piling up their stakes in Dana Petroleum ahead of crunch talks at the end of this week over its £1.7bn ($2.7bn) approach from the Korea National Oil Corporation, reports The Telegraph. Frenzied arbitrage trading among hedge funds means that they now own more than 15% of the company – and possibly much more. Since the Koreans revealed their approach on 2 July, Dana's share price has risen from £0.45 ($0.72) to £17 (around $27). Market sources said an 11% stake built by UBS over the last few weeks was probably a position held on behalf of arbitrage hedge funds. Traders appear to be betting that the deal will go ahead, despite uncertainty over Dana's position.

Pardus Capital Management is raising capital for its second fund, which focuses on distressed and event-driven opportunities in Western Europe, the US and Latin America, according to the Wall Street Journal. More than half of the fund’s capital will be allocated to Western Europe. Unlike its first fund, where Pardus seeks controlling stakes in six to eight companies it invests in and often sits on their boards, the second fund will take smaller stakes in a larger number of companies, to achieve greater flexibility.

Activist hedge-fund operator Ramius has written a letter to Extreme Networks's board saying "prompt action" is needed by the panel and management to turn around the provider of Ethernet networks, reports the Wall Street Journal. In addition to saying there continue to be "substantial opportunities to unlock value at Extreme that have gone unrealised," Ramius also questioned an amendment to the company's poison pill, putting the trigger level at 4.95%. The change was approved 1 July after the company was aware of Ramius wanting to build its stake to 9.9%. The plan went into effect 1 July and Ramius currently holds some 5.9% of Extreme's shares, essentially preventing it from building its stake further.

Harbinger Capital Partners manager Philip Falcone has pledged billions of dollars in stock, bonds, corporate loans as collateral as he tries to secure a $400m loan from investors in an effort to get his rural US satellite broadband project off the ground, reports Reuters. Assets Falcone is posting includes the majority of Harbinger’s 26% equity stake in Ferrous Resources, more than 12 million shares in Spectrum Brands Holdings, 86 million shares of African Medical Investments and much of the fund’s equity interest in Harbinger Global Wireless.

LAUNCHES
Everest Capital has launched a new fund focused on so-called frontier markets such as Nigeria, Bangladesh and Pakistan, according to MarketWatch. The $2bn hedge fund, run by Marko Dimitrijevic, has been investing in emerging markets for roughly 20 years and started trading in the "frontier" markets in 2008. By June, the firm had $90m allocated to its frontier strategy. Now Everest is opening the strategy to outside investors, according to a letter sent to existing investors. The capacity of the new fund is approximately $400m.

PEOPLE MOVES
The expansion of Cavendish Asset Management continues with the appointments of Neil Mitchell and Deepti Goyal as portfolio manager and senior manager respectively. Mitchell arrives from Adam and Company where he co-managed UK small/mid cap and AIM products. Goyal previously worked at Redburn Partners where she was a sell-side analyst covering IT and software. Both Mitchell and Goyal will perform vital support functions for Cavendish, expanding into the UK retail market, having launched two new funds (UK Select and UK Balanced) earlier this year.