David Tepper, who runs the Appaloosa Management hedge fund, may seek to block a debt-for-equity swap aimed at rescuing passenger and freight transporter Sea Containers from defaulting on its bonds. Tepper is worried about the dilutive effects of the exchange, according to the Telegraph. Details of the proposed swap have not yet been made public. And, sadly, we haven't been able to get anyone to leak them to us, either.
According to the Telegraph, Tepper's fund bought its shares in the company for $7 and $8 a share and believes the shares are now worth close to $17 a share. Appaloosa controls around 11.3% of the shares.
[More on the trouble at Sea Containers and David Tepper after the jump]
Sea Containers has been in trouble for a while, but things picked up last when the company announced two possible breaches of its obligations to bondholders. The company said it could not yet determine whether it is in compliance with bond covenants requiring it to maintain a minimum net worth, and would not be in the position to confirm compliance until it had completed an internal review of its financial position. The company has not yet finalized its annual financial statement for 2005 or for the quarterly statement for the first quarter of 2006.
Sea Containers also announced it intended to violate bond covenants requiring it to use proceeds from asset sales to pay down debt, buy replacement assets or buy back bonds. The company said it needed to keep some of the proceeds from the sale of shares in Orient-Express Hotels in order to meet its cash flow requirements. Sea Containers has been seeking to raise cash by selling off assets. including a recently announced sale of its Baltic ferry business.
David Tepper is one of the top paid hedge fund managers in the world. He formerly ran the high yield bond desk at Goldman. He formed Chatham, New Jersey based Appaloosa Management in 1993.
US hedge fund seeks to block Sea Containers rescue scheme [Telegraph]