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Corporations Seeking Capital From Hedge Funds
I've noticed a marked increase in the number of news stories, email inquiries and conversations over the past 4 months regarding private firms including corporations, patent portfolio companies and real estate groups seeking capital from hedge funds. This is for obvious reasons but is interesting none the less as many hedge funds may continue to pursue this "bank-like" strategy long after the dust settles. Small companies are always hungry for capital and many will agree to very aggressive terms in order to get to the next level. Here's a short piece on this trend:Smaller companies on the junior Alternative Investment Market (AIM) are being forced to borrow cash from hedge funds at "usury rates" in order to survive, Square Mile insiders have warned.
Some cash-rich fund managers are avoiding volatile equity and bond markets and instead lending to AIM firms, lured in by the prospect of earning giant fees.
"The kinds of costs involved in borrowing from some of these guys are huge," said one city chief executive. "But they have no alternative in many cases because traditional bank lending has dried up. It's like you or me being desperate enough to go and borrow from the local thug with a baseball bat." The practice is thought to have crept in over the past few months as companies have suffered at the hands of the credit crunch during the summer. Read more...
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