With the key the liquidation pure and simple of Amaranth

Nick Maounis is not ready to forget on Thursday, September 14. That day, he said in the Friday night to investors, his management company Amaranth Advisors lost $ 560 million in negotiations involving his positions open on the New York market of derivatives of natural gas ("Les Echos" of September 20, 21 and 22). As of this date, the Fund for American Arbitration loses control of the situation. "We continue to reduce our exposure to natural gas, but that we may sell other positions to generate the cash to pay margin calls," says the founder of the "hedge fund" in crisis. But the news of the difficulties of Amaranth short markets. "Our access to liquidity of the market, which was already limited, definitively closed", he says. Taken by surprise by the speed of the reaction of competitors and by "a series of unusual and unforeseeable events" on the natural gas market, the Fund based in Greenwich (Connecticut) worked to find potential buyers for its positions in the natural gas, and then for the whole of its content energy portfolio in his vehicle investment alternative multi strategy. Lost sentence. One after the other, interested parties declined the proposal. During this time, the Amaranth creditors threaten Corporation net cut his lines of credit if the Fund fails to quickly dispose of its assets in energy. With the key, the liquidation pure and simple of Amaranth. It is in an attempt to avoid this outcome that Nick Maounis eventually agreed, in the evening of September 18, an offer to the discounts on these positions in energy on the part of a "third party", the "hedge fund" Citadel Investment (12 billion dollars of assets) and JPMorgan Chase, number three in the banking sector in the United States. The decision to sell off its interests in energy and to divest holdings in companies (including RAM Energy Resources and the Indian Sterling Biotech) was conceived as an extreme remedy to "continue the activity to deliver our clients the same past consistent yields protected high risk." This strategy is now conducted in concert with Phil Harris, partner of the consulting firm Skadden Arps, which has been one of the agents of the banking consortium responsible for the recapitalisation of fund Long-Term Capital Management (LTCM) (1).

Unlikely systemic crisis

Anxious to restore a relationship of trust with its customers and creditors, Nick Maounis starts this week a series of interviews with each of them. As the "motions substantial repayment", received recently by Amaranth, its founder provides "assess them carefully preserving the interests of all of the investors and in accordance with our fiduciary obligations to the best".

The party is far from over for Amaranth. But creditors and customers do not appear, for the time being, want to finalize the carpet alternative Fund. Rumours of Citigroup entered its capital circulating already. Finally, it seems unlikely at this stage, the Amaranth crisis turns into a systemic crisis. In any case, it is the view expressed by the rating agencies Moody's and Standard & Poor's.