Capitol Fax.com - Your Illinois News Radar » Hedge fund in bond lawsuit owns derivatives that will pay off if Illinois defaults on the debt
SUBSCRIBE to Capitol Fax      Advertise Here      Mobile Version     Exclusive Subscriber Content     Updated Posts    Contact
CapitolFax.com
To subscribe to Capitol Fax, click here.
Hedge fund in bond lawsuit owns derivatives that will pay off if Illinois defaults on the debt

Friday, Aug 16, 2019

* Click here for some background if you need it. Bloomberg

Warlander Asset Management, the hedge fund seeking to invalidate $14.3 billion of Illinois bonds, bought derivatives that will pay off if the state defaults on the debt.

An attorney for Warlander’s co-plaintiff, John Tillman, the chief executive officer of the Illinois Policy Institute, disclosed the firm’s derivative wager at a hearing in Springfield on Thursday. That confirms the assertion made by two big bond investors, Nuveen Asset Management LLC and AllianceBernstein, in a brief arguing that the case should be tossed out — saying it raises questions about Warlander’s motives.

“Permitting activist investors to litigate against the validity of widely held municipal bonds based on their credit default swap bets could introduce a significant destabilizing force into the municipal markets and harm investors and government entities alike,” Nuveen and AllianceBernstin said in their filing on Friday. […]

A credit-default swap contract is similar to insurance on a bond, but the purchaser doesn’t need to own any of the underlying debt to buy one. The swap purchaser can buy the bonds after they default and then tender them to the swap seller to get full payment on the contract.

* Bond Buyer

The municipal bond market must wait up to two weeks to learn whether a judge will allow a complaint that seeks to invalidate $14.3 billion of Illinois general obligation bonds to proceed.

The case was “well-briefed” and “well-argued” on both sides, Sangamon County Circuit Court Judge Jack D. Davis II said Thursday. “There’s a lot of a material here” and I “believe it is warranted for some further review.” […]

He said he would rule within the next 14 days on whether the case should be allowed to proceed as a taxpayer action complaint. […]

A handful of professionals from institutional investment houses and investment banks attended the hearing in Springfield as the market looks for signals as to whether the courts will conclude that the lawsuit meets the legal criteria to proceed. If so, the case would then be litigated on its merits.

* Warlander’s involvement in the case was defended by Wirepoints…


If they can’t see the difference here, then I can’t really help them.

- Posted by Rich Miller        

25 Comments
  1. - Bertrum Cates - Friday, Aug 16, 19 @ 10:11 am:

    “Indirect interest”

    lololololol

    “Motives shouldn’t matter to the court’s decision on whether the questioned bonds were properly issued.”

    Then case dismissed.


  2. - TheInvisibleMan - Friday, Aug 16, 19 @ 10:18 am:

    Of course Wirepoints is defending them.

    It’s wise to remember who wirepoints is founded by, and who contributes their content.

    If you guessed Illinois Policy Institute executives, you are correct.


  3. - Norseman - Friday, Aug 16, 19 @ 10:18 am:

    It’s all about the money. If this case doesn’t get tossed, the corrupt will win another one.


  4. - Barrington - Friday, Aug 16, 19 @ 10:25 am:

    Big potential case and I am glad that Rich has brought this to the attention of readers.


  5. - Truthteller - Friday, Aug 16, 19 @ 10:32 am:

    I wonder if this was Rauner strategy and if he and his circle are involved?…..


  6. - the Edge - Friday, Aug 16, 19 @ 10:33 am:

    A first grader could read the Illinois constitution and see how the bonds were authorized; this reeks of politics and money groping.


  7. - Honeybear - Friday, Aug 16, 19 @ 10:39 am:

    The perfidy that Rauner, IPI, Koch, et al
    engaged in
    was always
    for profit.

    Just like Intersect Illinois
    Which just folded
    Perfidy for profit


  8. - Nick - Friday, Aug 16, 19 @ 10:39 am:

    Rauner?


  9. - Last Bull Moose - Friday, Aug 16, 19 @ 10:46 am:

    My first thought was that this sounds like champerty. (Which I then had to look up. ) Basically Party C finds Party B in a suit against Party A in return for a share of the proceeds if B wins. In English Common Law this is illegal.

    In the States we allow lawyers to work on a contingency fee basis, which sounds like champerty to me. Not sure how this lawsuit differs from a contingency fee arrangement.

    The claim is that contingency based lawsuits keep people honest. One could make the same case here.

    The lawsuit makes me uncomfortable, but it may have to go forward for a trial on the merits.


  10. - Blue Dog Dem - Friday, Aug 16, 19 @ 10:46 am:

    Legalized thievery.


  11. - Last Bull Moose - Friday, Aug 16, 19 @ 10:47 am:

    Funds not finds.


  12. - 47th Ward - Friday, Aug 16, 19 @ 10:53 am:

    Grifters.


  13. - JS Mill - Friday, Aug 16, 19 @ 11:00 am:

    =A credit-default swap contract is similar to insurance on a bond, but the purchaser doesn’t need to own any of the underlying debt to buy one. The swap purchaser can buy the bonds after they default and then tender them to the swap seller to get full payment on the contract=

    It is more like buying a lotto ticket.

    This is a total farce and a complete scam. Tillman needs to be outed for the grifter he is.


  14. - the Edge - Friday, Aug 16, 19 @ 11:20 am:

    Last Bull Moose: please explain the merits of the case. In plain language the IL Constitutions states these bonds could be issued.


  15. - Wirepoints - Friday, Aug 16, 19 @ 11:47 am:

    Rich, while there may be aspects of this lawsuit on which we agree, you are sorely wrong about the very specific issue of how and whether Warlander’s profit motive should pertain to the case. It’s worth a full article, which we will write and post soon. And please tell your commenters to stop lying about how we are funded.


  16. - Soccermom - Friday, Aug 16, 19 @ 12:02 pm:

    Is Rauner involved? Has he denounced?


  17. - Last Bull Moose - Friday, Aug 16, 19 @ 12:18 pm:

    I have no opinion on the merits of the case. I understood the immediate question was whether to dismiss the case prior to looking at the merits.


  18. - Jocko - Friday, Aug 16, 19 @ 12:40 pm:

    ==please tell your commenters to stop lying about how we are funded.==

    Next he’ll be arguing that Wilmette is a middle-class suburb./s


  19. - Da Big Bad Wolf - Friday, Aug 16, 19 @ 12:43 pm:

    If Warlander and Tillman stand to make a killing then how can they claim they are just good citizens concerned the bonds are unconstitutional?
    I have a high tolerance for hypocrisy, but this is blue green algae toxicity level hypocrisy.


  20. - TheInvisibleMan - Friday, Aug 16, 19 @ 12:46 pm:

    Step up your game Wirepoints. Nobody said anything about your funding here. Was that a slip? Should we start looking into that a little more deeply now too? I’ll start digging on that next. I’ll pretend to be surprised at what I find.

    The claim was about your content and there is nothing not-factual about it. Your presidents bio page is STILL on the Illinois Policy Institute ‘about us’ page, where he is listed as “former VP of policy”.

    Own up to your flimsy house of cards. Can we discuss “The Heartland Institute” next, where your president also has his own “about” page?


  21. - Oswego Willy - Friday, Aug 16, 19 @ 12:48 pm:

    ===If they can’t see the difference here, then I can’t really help them.===

    I had thought the judge would say as much when this question arised.

    It’s interesting what people see and what people are blind to as well.


  22. - Wirepoints - Friday, Aug 16, 19 @ 1:21 pm:

    TheInvisibleMan crying about opaque connections. The irony seems to escape him. We can save you some time. Ted and Mark have funded almost all of Wirepoints out of their own pockets, with no pay ever.


  23. - Benedict - Friday, Aug 16, 19 @ 1:44 pm:

    John Tillman, head of the Illinois Policy Institute, is a plaintiff in a lawsuit that would destroy Illinois financially? And would benefit him financially?
    Folks, this is the most unethical scandalous action to ever take place in an Illinois court, in recent history anyway.
    And GOP Leader Tim Schneider is boasting of working with the IPI?
    Why not just walk out to the public square and shoot yourself in the foot for all to see?
    The GOP is obviously desperate.


  24. - A Jack - Friday, Aug 16, 19 @ 2:44 pm:

    The financial industry has of late taken a renewed interest in CDS’s because of a Blackstone attempt to profit from a CDS by trying to convince a debtor to default. Blackstone is now facing a lawsuit by the other debt holders. The CFTC is also looking at changing the rules of when CDS’s can be redeemed.

    This may not end well for Warlander and those associated with this lawsuit. Warlander’s suit certainly appears to be an attempt to cash in on bond price manipulation.


  25. - Da Big Bad Wolf - Friday, Aug 16, 19 @ 3:04 pm:

    Even if the lawsuit is a long shot, the real money might be in bond prices being depressed at this news. Then Warlander Etc. buy them up cheap and sell them for a higher price when the lawsuit gets dismissed. It’s called manipulation.


TrackBack URI

Sorry, comments for this post are now closed.


* Pritzker backs legislative efforts to ban flavored e-cigarettes
* Taking the long view
* Question of the day
* Without debate or specifics, Gaming Board recommends state alter Chicago casino tax structure
* "What I said is 3% compounded annually is a tough climb"
* Pigeon poops on pol's parade
* It's just a bill
* Ric Ocasek
* Looking on the bright side
* Fun with numbers
* OK, but how do you draft the law?
* State's red flag law is a "public health tool"
* "Do not assume that what you look at on the outside is what’s going on on the inside"
* Pritzker orders budget cutting scenarios
* *** LIVE COVERAGE ***
* Yesterday's stories

Support CapitolFax.com
Visit our advertisers...

...............

...............

...............


Loading


Main Menu
Home
Illinois
YouTube
Pundit rankings
Obama
Subscriber Content
Durbin
Burris
Blagojevich Trial
Advertising
Updated Posts
Polls

Archives
September 2019
August 2019
July 2019
June 2019
May 2019
April 2019
March 2019
February 2019
January 2019
December 2018
November 2018
October 2018
September 2018
August 2018
July 2018
June 2018
May 2018
April 2018
March 2018
February 2018
January 2018
December 2017
November 2017
October 2017
September 2017
August 2017
July 2017
June 2017
May 2017
April 2017
March 2017
February 2017
January 2017
December 2016
November 2016
October 2016
September 2016
August 2016
July 2016
June 2016
May 2016
April 2016
March 2016
February 2016
January 2016
December 2015
November 2015
October 2015
September 2015
August 2015
July 2015
June 2015
May 2015
April 2015
March 2015
February 2015
January 2015
December 2014
November 2014
October 2014
September 2014
August 2014
July 2014
June 2014
May 2014
April 2014
March 2014
February 2014
January 2014
December 2013
November 2013
October 2013
September 2013
August 2013
July 2013
June 2013
May 2013
April 2013
March 2013
February 2013
January 2013
December 2012
November 2012
October 2012
September 2012
August 2012
July 2012
June 2012
May 2012
April 2012
March 2012
February 2012
January 2012
December 2011
November 2011
October 2011
September 2011
August 2011
July 2011
June 2011
May 2011
April 2011
March 2011
February 2011
January 2011
December 2010
November 2010
October 2010
September 2010
August 2010
July 2010
June 2010
May 2010
April 2010
March 2010
February 2010
January 2010
December 2009
November 2009
October 2009
September 2009
August 2009
July 2009
June 2009
May 2009
April 2009
March 2009
February 2009
January 2009
December 2008
November 2008
October 2008
September 2008
August 2008
July 2008
June 2008
May 2008
April 2008
March 2008
February 2008
January 2008
December 2007
November 2007
October 2007
September 2007
August 2007
July 2007
June 2007
May 2007
April 2007
March 2007
February 2007
January 2007
December 2006
November 2006
October 2006
September 2006
August 2006
July 2006
June 2006
May 2006
April 2006
March 2006
February 2006
January 2006
December 2005
April 2005
March 2005
February 2005
January 2005
December 2004
November 2004
October 2004

Blog*Spot Archives
November 2005
October 2005
September 2005
August 2005
July 2005
June 2005
May 2005

Syndication

RSS Feed 2.0
Comments RSS 2.0
WordPress




Hosted by MCS SUBSCRIBE to Capitol Fax Advertise Here Mobile Version Contact Rich Miller