Luxor Capital Acquires Convertible Preferred Stock in Altisource Asset Management ~ market folly

Monday, March 17, 2014

Luxor Capital Acquires Convertible Preferred Stock in Altisource Asset Management

Hedge fund firm Luxor Capital has acquired 250,000 shares of convertible preferred stock in Altisource Asset Management (AAMC), the company announced today.

AAMC announced a $300 million buyback and raised $250 million from the private placement of these shares to Luxor.  The hedge fund won't receive dividends and the conversion price is $1,250 per share.

Mortgage Servicers Under Scrutiny

Altisource Asset Management is one of the companies in Bill Erbey's empire (along with Ocwen Financial (OCN), Altisource Portfolio Solutions (ASPS) and Altisource Residential (RESI)).  Shares of numerous of these companies have been under fire this year as regulatory scrutiny on mortgage servicers has picked up.  In the past, we've highlighted the investment thesis on ASPS.

Hedge Funds Involved in MSR-Related Plays

At the end of the fourth quarter (and before the scrutiny intensified), numerous hedge funds were involved in these companies.  Given the volatility in shares, it's hard to say who is still involved besides Luxor.  But here's a list of top holders as of Q4 2013:

AAMC: SAB Capital Management, Neuberger Berman, Tiger Eye Capital, Luxor Capital, Long Pond Capital, Capital Research Global Investors, White Elm Capital, Tyrian Investments

OCN: Capital Research Global Investors, Neuberger Berman, Egerton Capital, Pennant Capital, Pine River Capital, White Elm Capital,Tyrian Investments

ASPS: Neuberger Berman, Luxor Capital, Renaissance Technologies, Omega Advisors, SAB Capital, White Elm Capital, Tiger Eye Capital,Tyrian Investments

RESI: Capital Research Global Investors, SAB Capital, BlackRock, Bloom Tree Partners, Neuberger Berman, Hayman Capital

Last week, Kyle Bass' hedge fund Hayman Capital boosted its stake in Nationstar Mortgage Holdings as well.

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