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hibro reaches out to hedge fund investors

Date: Thursday, November 19, 2009
Author: Alistair Barr, MarketWatch

Firm offers commodities fund through Blackstone unit Park Hill

Phibro LLC, which became embroiled in controversy over star trader Andrew Hall's compensation, is reaching out to hedge fund investors as Citigroup Inc. relinquishes its grip on the profitable energy-trading firm, two people familiar with the situation said Wednesday.

Phibro began offering its commodities-trading fund to hedge fund investors this month through Park Hill Group, the people said on condition of anonymity. The fund is run by a team led by Hall, they added.

Park Hill is a unit of Blackstone Group /quotes/comstock/13*!bx/quotes/nls/bx (BX 15.26, -0.30, -1.90%) that helps private equity funds, real estate funds, venture capital funds and hedge funds raise money. Since it started in 2005, Park Hill has served as a placement agent to private-equity and hedge funds that raised more than $77.1 billion, according to its Web site.

Phibro has been part of Citigroup /quotes/comstock/13*!c/quotes/nls/c (C 4.26, -0.03, -0.70%) for roughly a decade, generating solid profits for the financial-services giant. Hall was reportedly paid almost $100 million last year based on a formula that gave him a share of Phibro's profits. He was reportedly due to be paid more this year.

However, Citigroup has been one of the biggest recipients of government bailout money since the financial crisis hit last year. Compensation limits came with that support, putting Hall and Phibro on a collision course with the government's so-called Pay Czar Kenneth Feinberg.

To avoid a clash, Citigroup agreed on Oct. 9 to sell Phibro to oil company Occidental Petroleum /quotes/comstock/13*!oxy/quotes/nls/oxy (OXY 81.14, -2.08, -2.49%) for $250 million. The deal is expected to close by the end of 2009. See MarketWatch story.

Hall and other senior Phibro managers agreed to have "significant" portions of their current and future bonuses deferred and retained by Phibro and paid out in future years. The future payouts will be adjusted to reflect Phibro's results, Occidental said.

Phibro, which trades oil, natural gas, metals and agricultural products, averaged roughly $200 million a year in pre-tax profit from 1997 until the second quarter of 2009. In the last five years, it's been even more successful, earning $371 million a year, on average, according to Occidental.

Representatives at Phibro, Citigroup, Occidental, Blackstone and Park Hill declined to comment.