S&P says it may cut Ackman hedge fund's rating

Thu Mar 17, 2016 4:25pm EDT
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By Svea Herbst-Bayliss

NEW YORK, March 17 (Reuters) - Billionaire investor William Ackman's already very bad week got worse on Thursday.

Rating agency Standard & Poor's said it may cut its BBB rating of Ackman's publicly traded Pershing Square Holdings vehicle in the wake of weak investment returns and a sharp drop in its net asset value.

"The fund's performance since we initiated the rating on PSH in May 2015 has been weaker than peers, in contrast to its stellar track record in previous years," S&P analysts wrote, noting that the fund lost money on 11 of 12 positions since October 2015.

A spokesman for the firm declined to comment.

Ackman's Pershing Square oversees roughly $11 billion for wealthy clients, including state pension funds.

The fund's net asset value tumbled to $3.8 billion this week from $5.3 billion in October 2015, the S&P analysts wrote. That pushed the fund's debt-to-total-assets ratio to more than 20 percent from 15 percent at the end of October 2015.

The most immediate cause for Ackman's woes is the sharp decline in drug company Valeant Pharmaceuticals' stock price, which crashed more than 50 percent this week and cause Ackman's firm to lose roughly $1 billion on paper. The company delivered worse-than-expected financial guidance and raised the chance of defaulting on its debt if it breaches agreements with creditors by not filing its annual report on time.

This year alone, the Pershing Square Holdings fund, which has been trading publicly since 2014, lost 26.4 percent. That followed on a 20 percent drop in 2015. The year it was listed in Amsterdam, it scored a 40 percent gain.   Continued...