Hedge Fund Behind Amazon-MGM Deal Amasses Big Bet on Uranium | Sidnaz Blog

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The hedge fund behind the

Amazon.com Inc.

-MGM Holdings Inc. deal has another trade up its sleeve: going big on uranium.

New York hedge fund Anchorage Capital Group LLC has amassed a holding of a few million pounds of uranium, people familiar with the matter say, in a bet that prices of the nuclear fuel will recover after a decade in the doldrums. It is buying and selling uranium alongside mining companies, specialist traders and utility firms with nuclear-power plants, turning the fund into a significant player in the market.

Venturing into the uranium market, which is much smaller than oil or gold markets, is unusual for a firm that typically invests in corporate debt. It is another example of money managers straying into esoteric markets in search of returns after a yearslong run-up in stocks and slide in a bond yields.

Anchorage was recently in the spotlight after scoring about $2 billion in paper profits from Amazon’s deal to buy MGM in May. The hedge fund became MGM’s biggest shareholder after the Hollywood studio emerged from bankruptcy in 2010.

Anchorage’s physical uranium holdings are also a rarity because Wall Street firms don’t typically own physical uranium. Most investors bet on uranium prices by buying shares of mining firms, or through companies like

Yellow Cake

PLC., which acts as an exchange-traded fund.

In the 2000s, investors piled into uranium trades, helping to power a run-up in prices that peaked in 2007. Most funds exited either during the 2008-09 financial crisis or after Japan’s 2011 Fukushima nuclear disaster sapped demand.

Goldman Sachs Group

has pared back its uranium trading book and

Deutsche Bank AG

has quit the market, leaving

Macquarie Group Ltd.

as the financial institution with the biggest presence.

The uranium that is usually traded takes the form of U3O8, a lightly processed ore. Prices for U3O8 have sagged since Fukushima knocked demand, leading to a glut that traders say has yet to be whittled down.

The material this week traded at $32.05 a pound, according to UxC LLC, a nuclear-fuel data and research company. Prices reached an all-time high of $136 a pound in 2007, according to records going back to 1987.

Anchorage is wagering on a reversal. Spearheaded by trader Jason Siegel, the fund began acquiring uranium a few years ago, because its analysis showed most miners were booking losses at prevailing prices, a person familiar with the fund’s thinking said. The fund bet that uranium prices would rise to encourage miners to produce enough material.

Mr. Siegel didn’t respond to requests seeking comment.

The entry of a financial firm has caused a stir in the uranium market. Anchorage buys and sells infrequently, but in large quantities that put it in the same league as big uranium merchants such as Traxys Group, participants say.

A Honeywell Specialty Materials plant in Metropolis, Ill.



Photo:

Steve Jahnke/Associated Press

Anchorage hasn’t publicly disclosed its interest in the uranium market, the size of its holdings or the terms of any specific transactions. The exact size of Anchorage’s position—a topic of speculation in the market—couldn’t be learned. The person familiar with the fund’s thinking said it owned fewer than five million pounds of uranium. The overall spot market for the nuclear fuel turns over 60 million to 80 million pounds each year, according to UxC.

Due to strict rules about where uranium can be held, trading typically doesn’t involve moving the fuel around the world. Firms instead take ownership of U3O8 stored in drums at three processing facilities in France, Canada and the U.S. When they sell, buyers take ownership on the spot. The transactions aren’t reported publicly.

Anchorage’s wager relies on buying uranium and selling it to utility companies and others at a higher price for delivery several years in the future, in what is known as a carry trade. Doing so could generate annualized returns of roughly 5% for Anchorage, according to people familiar with the matter.

SHARE YOUR THOUGHTS

How do you see the uranium market developing? Join the conversation below.

The hedge fund embeds options into sale agreements with utilities and other firms, people familiar with the matter say. This can involve selling fuel to a utility company at a discount in return for the right to deliver more uranium at a set price at a later date.

Anchorage isn’t alone in betting that prices are primed to rebound.

Investment firms including Segra Capital Management LLC, Sachem Cove Partners LLC and Azarias Capital Management LP expect that efforts to wean the world off fossil fuels will require new nuclear-power stations, according to executives at the funds. They are seeking to profit by buying shares of uranium miners or firms like Yellow Cake, which is up 31% in London trading over the past year.

Some investors hesitate to own uranium outright because of the perception that it can cause dangerous accidents, according to Joe Kelly, chief executive of brokerage Uranium Markets LLC.

“There’s a deterrent that does not exist in other commodities,” said Mr. Kelly.

Write to Joe Wallace at [email protected]

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West Virginia Gov. Jim Justice Is Personally Liable for $700 | Sidnaz Blog

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West Virginia Gov.

Jim Justice

is personally on the hook for nearly $700 million in loans his coal companies took out from now-defunct Greensill Capital, according to people familiar with the loans and documents described to The Wall Street Journal.

Mr. Justice’s personal guarantee of the loans, which hasn’t been reported, puts financial pressure on the popular Republican governor. He is also dealing with unrelated lawsuits alleging parts of his sprawling network of coal companies breached payment contracts or failed to deliver coal.

Greensill packaged the loans and sold them to investment funds managed by

Credit Suisse Group AG


CS -1.08%

.

Credit Suisse


CS -1.08%

and Greensill ran $10 billion in supply-chain finance funds that extended financing to a range of borrowers.

The Swiss bank froze the investment funds in March and is in talks with Mr. Justice’s Bluestone Resources Inc. and other borrowers to recoup money to make investors whole, according to the people familiar with the discussions.

Credit Suisse

is under pressure to recover money quickly and has named Bluestone as one of three large borrowers from the Greensill funds that it has identified in its recovery efforts.

Bluestone hadn’t expected to begin repaying the Greensill loans until 2023 at the earliest, it said in a lawsuit brought in March in a New York federal court alleging Greensill committed fraud in its lending practices.

Greensill was a once-hot private finance firm. Its unraveling sowed financial damage far from its U.K. headquarters.



Photo:

oli scarff/Agence France-Presse/Getty Images

Bluestone’s general counsel and an outside lawyer representing Bluestone didn’t respond to requests for comment. Requests for comment from Mr. Justice’s spokesman weren’t returned.

Greensill was a once-hot private finance firm whose bankers said could have been worth $40 billion in a potential initial public offering. It attracted investment from

SoftBank Group Corp.

before collapsing into bankruptcy in March when it lost a key type of insurance that backed up its loans.

Greensill specialized in supply-chain finance, a type of cash advance that helps companies manage cash flow.

Its unraveling sowed financial damage far from its U.K. headquarters, leading to the collapse of banks in Germany and Italy. It dealt a black eye to Credit Suisse, which sold Greensill assets to investors as relatively safe, and it imperiled the finances of British-Indian steel magnate

Sanjeev Gupta.

The Bluestone companies were one of Greensill’s largest clients, the Journal reported earlier.

Credit Suisse in a recent notice to investors said Bluestone owes nearly $700 million in loans.

In a notice to investors, Credit Suisse said Bluestone owes nearly $700 million in loans.



Photo:

Dan Kitwod/Getty Images

Mr. Justice’s companies own several coal-related businesses, and have settled a number of cases in recent years for alleged nonpayment of bills, according to court records published by the investigative journalism website ProPublica.

The guarantees were provided by Mr. Justice as well as his wife and covered unlimited amounts, some of the people familiar with the loans said. Mr. Justice’s son and Bluestone’s chief executive, James C. Justice III, guaranteed the loans up to a certain limit, one of the people said, though that figure couldn’t be learned. All three are listed as plaintiffs in the lawsuit against Greensill.

Borrowers make personal guarantees on business loans to give lenders additional comfort in the case of default.

Forbes this year dropped Mr. Justice from its billionaires list, owing to Greensill’s failure. It now pegs his net worth at $450 million, down from $1.2 billion in April 2020. His wealth stems from dozens of coal companies, farms and other businesses he and his family oversee, including the famed Greenbrier resort in White Sulphur Springs, W.Va.

Mr. Justice was elected in 2016 as a Democrat. He switched to the Republican party in 2017 and is an avid supporter of former President

Donald Trump.

Seen by supporters as a man of the people despite his wealth and political power, he still coaches the girls’ basketball team at Greenbrier East High School.

SHARE YOUR THOUGHTS

What will be the impact on Gov. Jim Justice and his coal companies from the collapse of Greensill Capital? Join the conversation below.

West Virginia voters haven’t been deterred by reports about his companies’ financial entanglements, re-electing him in 2020 with 65% of the vote. His approval rating stands at 62%, according to intelligence company Morning Consult.

“The governor’s business interests don’t carry a lot of weight in this state, there’s just not a lot of concern,” said Marybeth Beller, associate professor of political science at Marshall University. “The former president had all kinds of business problems and it just didn’t seem to matter that much to West Virginians. Jim Justice follows suit.”

Bluestone and Greensill began their relationship in May 2018, when Greensill Vice Chairman

Roland Hartley-Urquhart

got in touch through a mutual business associate, according to the Bluestone lawsuit.

The Bluestone companies received financing over a three-year period. When the first set of loans matured, Greensill replaced them with new loans in a process that became known as a “cashless roll,” according to the Bluestone lawsuit.

Many of the loans were backed by “prospective receivables” that hadn’t yet been generated, from a list of “prospective buyers,” some of whom might not have ever become Bluestone customers, the lawsuit says. It couldn’t be learned exactly how Bluestone used the proceeds of the loans.

Mr. Justice’s companies play a sizable role in the market for coal used in steelmaking. They mined more than 1 million tons of coal in 2018, primarily metallurgical, according to S&P Global Market Intelligence. The largest metallurgical coal miner in the U.S. produced 12 million tons in 2019.

Metallurgical coal prices dropped sharply last year but have recently rebounded to pre-pandemic levels as economies reopen.

Bluestone has a separate financial dispute with Caroleng Investments Ltd., a British Virgin Islands-incorporated company. Earlier this month, a federal judge in Delaware ordered Bluestone to post a $10 million security bond in relation to its 2015 purchase of coal assets from Caroleng. In January, Bluestone’s general counsel told the court that an earlier arbitration ruling in Caroleng’s favor would result in a hardship, according to a court filing.

In another case, a federal judge in Delaware in March found that a Justice company failed to deliver nearly 700,000 tons of coal to a Pennsylvania exporter between 2017 and 2018. He ordered the company and Mr. Justice to pay the exporter $6.8 million. Mr. Justice had personally guaranteed the coal deliveries.

Mr. Justice and the company have sought to pause the enforcement of the judgment.

Write to Julie Steinberg at [email protected] and Duncan Mavin at [email protected]

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U.S. Stock Futures Slip Ahead of Jobless Figures | Sidnaz Blog

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U.S. stock futures edged down ahead of an update on the number of Americans filing for unemployment benefits.

S&P 500 futures were down 0.2% and futures on the Dow Jones Industrial Average slipped 0.1%. Changes in equity futures don’t necessarily predict moves after the markets open.

In Europe, the Stoxx Europe 600 was broadly flat in morning trade as gains in materials and communication services sectors were tempered by losses in utilities and information technology sectors.

Centamin

declined 2.3% for a two-day losing streak.

The U.K.’s FTSE 100 edged down 0.1%. Other stock indexes in Europe were mixed as the U.K.’s FTSE 250 added 0.1%, France’s CAC 40 meandered after the flat line and Germany’s DAX shed 0.3%.

The Swiss franc and the euro were up 0.1% against the U.S. dollar and the British pound was mostly flat against the dollar, with 1 pound buying $1.41.

In commodities, international benchmark Brent crude fell 0.5% to $68.37 a barrel. Gold remained flat, at $1,901.10 a troy ounce.

The yield on German 10-year bunds gained to minus 0.200% and 10-year gilts yields strengthened to 0.767%. The yield on 10-year U.S. Treasury gained to 1.583% from 1.572%. Yields move inversely to prices.

In Asia, indexes were mixed as China’s benchmark Shanghai Composite rose 0.4%, whereas Hong Kong’s Hang Seng was lower 0.2% and Japan’s Nikkei 225 index was down 0.3%.

Traders worked on the floor of the New York Stock Exchange on Wednesday.



Photo:

Courtney Crow/Associated Press

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