Amaranth investors offer forgiveness for redemptions

Date: Tuesday, March 27, 2007
Author: William Hutchings, Financial News US

Investors in the hedge fund run by Amaranth Advisors, which collapsed last year amid a $6.5bn (4.9bn) loss, have proposed dropping all potential litigation claims to speed up the payment of remaining capital.

Nick Maounis, founder of Amaranth, forwarded his clients a note he said had been written by investors representing about 10% of the capital in the funds. He said none of these investors are in any way affiliated with his firm and the proposal was made at their own initiative.

The note said: "We are interested in receiving further distributions of available cash as quickly as possible, in order to reinvest the capital elsewhere. The funds have had to consider how much to hold back from distributions to satisfy potential liabilities, including potential litigation claims.

"We propose each investor be given a choice to release potential litigation claims against the funds all parties indemnified by the funds."

The note's authors, whose identity has not been published, proposed that any plan along these lines be put in place only if investors representing a substantial majority of the interests in the funds approved it.

Maounis told his clients Amaranth would begin work on a formal consent process if it found sufficient preliminary interest from other investors.

Separately, Brian Hunter, the Amaranth energy trader whose positions lay behind the fund's collapse, has distributed to potential investors details of a fund, run by his new firm Solengo Capital Advisors, that he has launched. His firm's brochure said the fund is "structured to become a multi-billion dollar commodity investment vehicle".

Hunter has established the firm with four former colleagues at Amaranth: Shane Lee and Matthew Calhoun, who were also portfolio managers; Shondell Sabad, chief operating officer, formerly of TD Securities; and Karl Koster, head of system engineering.