Tuesday April 29, 03:38 PM
Big Name Credit Crunch Victims
By David Stevenson
If you're a regular visitor to The Fool, you'll know there's been a lot written, and talked, about the credit crunch.
But most of the column inches have been devoted to the likes of people like you and me. Like how difficult
it is to get a mortgage, or whether the bank will cut back your overdraft.
So what about the big hitters, those who've made grillions in the good times but have suffered a more than few setbacks recently as the money market mayhem mushroomed?
Near, if not at the top of the list, must be Tottenham Hotspur (LSE: TTNA.L - news) controller Joe Lewis who is believed to have sunk almost $900m buying shares in Bear Stearns (NYSE: BSC - news) , with the last tranche allegedly being purchased just hours before the investment bank ran out of cash and had to scurry round to the Fed, cap in hand.
Born in London's East End, self-made Lewis is probably best known to non-football supporters (yes, some of us still exist!) as one of the heavy duty currency speculators who reportedly won hundreds of millions of pounds on sterling's ignominious exit from the Exchange Rate Mechanism in 1992.
Three years later he targeted the Peso, whose subsequent collapse necessitated the Mexican economy being bailed out with US government loans.
According to Forbes magazine last year, Mr Lewis was the world's 369th richest person with wealth of $2.5bn. But his Bear bet must have slashed that sum quite sharply.
Now he is probing the legality of the JPMorgan takeover along with other leading shareholders, one of whom, asset manager Legg Mason (NYSE: LM - news) , has also taken something of a recent bath.
Legg may manage global funds worth almost $1 trillion, and so get some of the hottest bits of financial gossip available on the planet, but still managed to catch a cold with the failed investment bank.
Legg Mason's Value Trust mutual fund, run by star manager Bill Miller, was one of the biggest shareholders in Bear Stearns.
Miller was once dubbed 'fund manager of the decade' and until 2005 his portfolio was celebrated for beating the S&P500 index for 15 years. Yet he has just endured his worst quarter relative to the market in his 26-year career. The Value Trust lost 20% in the first quarter of 2008, more than twice the drop in the Standard & Poor's 500 share index.
Miller and the team have apologised to investors for the "awful" bad run, and remain confident about a performance turnaround based on being 'overweight' in financial stocks.
Good contrary thinking. Or maybe several of these were bought before their prices dived, and Miller & co. have doubled up.
Whatever, provided that the strategy works. Which it certainly didn't for hedge fund player RAB Capital (LSE: RAB.L - news) (LSE: RAB).
RAB bought big into Northern Rock (LSE: GB0001452795.L - news) after its first fall from grace, ending up with a 6.6% stake in the now-nationalised Newcastle-based bank. Now the fund manager is reduced to hoping for the best on the compensation front.
Executive chairman Michael Alen-Buckley has said that RAB is still considering legal action over the taking of the Rock into "temporary" public ownership. Though realistically, the idea of successfully suing the Government is probably pie in the sky, since without Bank of England support the mortgage lender would have been history months ago.
RAB has now bitten the bullet, writing down its Northern Rock stake to "substantially below" the 90p suspension price. But while there are other reasons as well, the whole episode hasn't done much for the fund manager's share price, which has just about halved over the last six months, undershooting the FTSE All-Share (news) by almost 40% into the bargain.
Now I was going to write about the Rock's ex-chief exec. Adam Applegarth. But he's done rather well out of his deal. As has former Citigroup (NYSE: C - news) big cahuna Chuck Prince, who rode off into the sunset with a near $100m payoff in his saddlebag.
So not every high rolling 'victim' has hit hard times.
Others are struggling somewhat after big deals were credit crunched, like property magnate Robert Tchenguiz who's rumoured to be wearing an near-£300m loss on his Sainsbury (LSE: SBRY.L - news) 's (LSE: SBRY) stake and whose 23% holding in Mitchells & Butlers (LSE: MAB) has halved in value in the last six months.
But before any Fool poster accuses me of Schadenfreude, that's not the point of my piece. It (Frankfurt: A0MLX5 - news) 's simply to show that even the great and the good make mistakes, and that when credit contracts, few are immune from feeling the pinch.
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