Search This Blog

14 Oct 2009

Hedge Fund Speculator Extraordinaire Buys Health Insurance

Hedge fund manager Paulson will own 9.9% of private health insurance company Conseco’s common stock after a private share sale, buying $77.9 million in stock and warrants.

Paulson & Co. Inc., on behalf of several hedge funds and accounts he manages will also have certain registration rights in connection with its acquisition of the common stock and warrants.

“This is a bold move,” said Andrew Schneider, founder and co-principal of HedgeCo Networks. “With the current healthcare debate in full swing, the timing is everything. But then, this is the kinds of risk we've come to expect from Paulson." Paulson made $2.5 billion last year, hedging against the U.S. housing market.

Paulson’s warrants will also convert to common stock at $6.50 a share. Conseco rose 78 cents, or 16%, to $5.77 at 7:47 p.m. in late New York trading. The shares have dropped about 68% in the past two years.

Conseco, run by Chief Executive Officer James Prieur, will also file for a public offering of $200 million in new common stock and will sell $293 million in convertible notes. The bond proceeds will be used to repurchase existing notes, the company said. The new debt, due in 2016, will pay investors 7%.

Paulson earned an estimated $2.5 billion last year, according to Institutional Investor’s Alpha Magazine. His Credit Opportunities Fund soared almost sixfold in 2007 on bets that subprime mortgages would plummet. Last year, his flagship fund returned 37 %, compared with a loss of 19% for hedge funds on average.

No comments: