BREAKING NEWS FROM CNBC’S KATE KELLY: BLUEMOUTAIN CAPITAL AND THE “LONDON WHALE”
When: Today, Wednesday, July 18th
Where: CNBC’s “Closing Bell”
Following is breaking news from CNBC’s Kate Kelly today, Wednesday, July 18th, live from the CNBC Institutional Investor Delivering Alpha conferencein New York City.
Following is the link to Kelly’s story on CNBC.com: http://www.cnbc.com/id/48223114.
All references must be sourced to CNBC.
MARIA BARTIROMO: WE’VE GOT KATE KELLY HERE, SHE’S BEEN TALKING TO THE HEAVY HITTERS HERE AT THIS DELIVERING ALPHA CONFERENCE. SHE’S GOT SOME BREAKING NEWS NOW AND SHE’S GOING TO WRAP UP SOME OF THE HIGHLIGHTS. KATE, WHAT DO YOU KNOW?
KATE KELLY: THANKS SO MUCH, MARIA. WELL SHORTLY AFTER YOUR BEST IDEAS PANEL I BUTTONHOLED ANDREW FELDSTEIN THE CEO OF BLUEMOUNTAIN CAPITAL, WHO DOES NOT MAKE A LOT OF THESE APPEARANCES, BUT IT WAS INTERESTING TO HAVE HIM TODAY NOT ONLY BECAUSE OF WHAT HE DISCUSSED ON THE PANEL, BUT ALSO BECAUSE HE GAVE ME SOME EXCLUSIVE DETAILS ON HOW HIS FIRM WAS INVOLVED IN HELPING JPMORGAN UNWIND ITS NOW-INFAMOUS “LONDON WHALE” TRADE EARLIER THIS YEAR. A LOT HAS BEEN WRITTEN ABOUT THAT. THEY’VE SAID VERY LITTLE PUBLICALLY OTHER THAN SORT OF ACKNOWLEDGING THAT THEY WERE INVOLVED. AND THERE WERE TWO THINGS THAT ARE INTERESTING HERE, TWO WAYS IN WHICH BLUEMOUNTAIN WAS INVOLVED ACCORDING TO FELDSTEIN. IN ONE CASE, ABOUT A YEAR AGO, LAST SUMMER AS WELL AS LAST FALL, BLUEMOUNTAIN GOT INTO AN INDEX ARBITRAGE TRADE, ESSENTIALLY THE INDEX WE WERE DEALING WITH HERE WAS THE CDX IG-9. IT IS A SOMEWHAT ILLIQUID CORPORATE CREDIT DERIVATIVES INDEX THAT TRACKS THE DEBT OF ABOUT 121 ISSUERS, 121 CORPORATIONS, SO IN THIS CASE, THEY ACTUALLY SHORTED THAT INDEX AND THEY WENT LONG THE SINGLE NAMES REPRESENTED BY THAT INDEX, TAKING ADVANTAGE OF A GAP IN THE SPREADS AND DOING SO PROFITABLY. THIS IS SOMETHING THAT BLUEMOUNTAIN DOES A LOT, SO THEY WERE COMFORTABLE WITH IT, BUT PERHAPS MORE IMPORTANTLY, EARLIER THIS YEAR IN MAY AND JUNE, SHORTLY AFTER JPMORGAN ANNOUNCED THIS $2 BILLION LOSING TRADE WHERE THEY HAD GONE LONG CORPORATE RISK, ESSENTIALLY LONG THE CDX IG-9, BLUEMOUNTAIN HELPED THEM DERISK BY ESSENTIALLY PURCHASING PART OF THAT POSITION FROM THEM AND HELPING THEM TAKE THE RISK DOWN IN THE PROCESS. HE WOULDN’T TALK ABOUT THE SIZE OF THE TRADE, HOW MUCH MONEY THEY MADE OR WHERE THEY STAND NOW BUT ESSENTIALLY HE SAID THERE ARE A COUPLE OF MISCONCEPTIONS THAT HE WANTED TO CLEAR UP. ONE, JUST QUICKLY, THAT THERE WAS SOMEHOW AN ADVERSARIAL RELATIONSHIP BETWEEN THE TWO ENTITIES, HE SAID IT WAS ESSENTIALLY FRIENDLY AND SECONDLY, MARIA, HE WANTED PEOPLE TO KNOW THAT BLUEMOUNTAIN ACTED VERY MUCH AS PRINCIPLE ON ITS OWN BEHALF, NOT AS AGENT FOR JPMORGAN.
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