Illiquids, redemptions bedevil Stark's purchase of Deephaven.

Mon Mar 30, 2009




Stark Investments' agreement to purchase the assets of the troubled Deephaven Capital Management on the cheap - for an initial $7.3 million - was seen as a strategic triumph when the deal was announced in late January. After all, the agreement gave the $8.5 billion Stark the right to manage Deephaven's funds (as well as ownership of most of the physical assets of the investment management firm).

Tactically, however, the deal has been challenging to implement as both Deephaven and Stark investors voiced concern over differences in the firms' valuation policies and worried about the sizable portion of illiquid assets in both firms' portfolios. The significant redemption requests Stark received for March 31 have further complicated matters as the firm has decided to fund redemption requests with both cash and in-kind distribution of...

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