Bankruptcy

There is a First Time for Everything

By J. Michael McBride

Ritchie Capital Management LLC, who was founded in 1997 by Thane Ritchie and manages more than $1 billion in investor assets including the remnants of Multi-Strategy, has been forced into involuntary bankruptcy by three investment companies with regards to two funds. Ritchie's lawyer, Ronald Barliant, said involuntary bankruptcy is almost unheard-of.

Hedge funds are loosely regulated investment pools, generally open only to wealthy people and institutions. Barliant asked a judge in January to throw out the involuntary petition seeking to recoup more than $45 million of roughly $1 billion claiming Ritchie is liable, stating that the petitioners aren't creditors--but investors. The petitioners argue that payment demands were denied, making them "creditors". After receiving only a partial payment in 2007, they were told they would get the rest of their money in annual installment over three years.

They have demanded balance sheets for every entity Ritchie owned in April 2007, when they say it sold most of its Multi-Strategy fund assets for $285 million. The investors want to ensure that Ritchie got "top dollar". By definition hedge funds "aren't like public companies subject to disclosure...[t]hey operate in the dark, and they like it there". Ritchie's counsel argues "the fact that somebody wants information is not a reason for the entity to be in bankruptcy". The investors claim that Ritchie may have wrongly put its own interests ahead of theirs because the company was hired by the buyer to manage the Multi-Strategy assets it sold. Ritchie informed the investors of the risk and that they might lose their entire investment.

The case was filed in the Northern District of Illinois, Chicago Division, before Judge Sonderby. The hearing is currently scheduled for February 26th regarding the dismissal.

You can read the entire article at: http://www.bloomberg.com/apps/news?pid=20601103&sid=aUGqynAAykD4&refer=n

Chandra

Full post as published by Texas Lawyer Blog on February 20, 2008 (boomark / email).