HFA Suffers from Bad Publicity

HFA Holdings (HFA), an Australian hedge-fund manager has said; negative media coverage was the cause for its drop in share price and not its financial position. The share price dropped 98 per cent since its peak last July. The share price of HFA closed at 4.9 cents last week which was well down on its $1.10 April 2006 listing price. It is said that, HFA could be compelled to write down $604 million worth of goodwill and management rights from its balance sheet.

Spencer Young, chief executive officer of HFA has said, “I do not believe the current HFA share price reflects the true value of the company's global capabilities as a top 50 by size [fund of absolute return fund manager] or our more than 12-year successful investment track record”, “The share price is more reflective of the negative media sentiment toward hedge funds generally and the lack of buying support for smaller cap companies”, he added. Young refused to comment on the write-off issue and said it is up to the board and auditor to decide.

HFA Holdings acquired $593 million worth of intangible assets last year from Lighthouse Investment Partners, a US fund manager. Lighthouse, last week revealed that it is forced to set up a special purpose vehicle to hold its illiquid investments. Ord Minnett, last month predicted that HFA could write-off up to $120 million. The broker said, however the non-cash write-off will not affect HFA's operations or debt agreements.

Young said HFA had no issues about servicing the $US130 million debt facility in spite of the fall in Australian dollar recently. He revealed that the company would take efforts to change some of the agreements on debt, after already getting Westpac Banking Corporation (WBC) to change one of the covenants on the loan.