Bill Ackman’s Pershing Square Holdings announced on Tuesday that it had raised $1 billion from investors in the bond market for use in the hedge fund’s investment objectives.
This is the first time that the firm has raised money by tapping the debt markets.
Senior notes to carry 5.5% coupon
In its statement, Pershing Square Holdings unveiled its pricing of $1 billion in senior notes due 2022 at a coupon of 5.500% per annum. The statement added that the net proceeds from the offering of the notes are expected to be used to make investments or hold assets in accordance with the firm’s investment policy, including by way of rebalancing transactions with other funds managed by Pershing Square Capital Management, L.P., besides funding operating expenses.
Pershing Square Holdings is Ackman’s publicly listed investment vehicle and trades in Amsterdam. Bill Ackman also runs a New York hedge fund, Pershing Square Capital Management, with $20 billion of assets under management.
Earlier it was felt Pershing Square Holdings might not reach its targeted $1 billion, thanks to jitters in Europe about Greece increasing uncertainty about the amount.
According to an individual who was on a conference call for potential investors earlier this month, Ackman plans to utilize the debt proceeds to help his $20 billion fund take on a big target.
Bill Ackman’s $3 billion Amsterdam IPO
As highlighted by ValueWalk last October, Pershing Square Holdings, Bill Ackman’s Amsterdam-based fund, raised $3 billion. A public listing would facilitate Ackman to have more freedom to run his activist campaign because he won’t have to deal with investor redemptions, thus making the pool of capital more permanent.
A listing on the Amsterdam exchange would make Ackman a major part of the mainstream of the market, as opposed to London, where he would be relegated to the specialist funds market.
As documented by ValueWalk, Bill Ackman’s moves indicate 2015 could be the year he goes after much larger companies – firms generally considered too large for an activist to influence. Activist investors are getting larger and are likely to become a growing threat to previously difficult-to-influence U.S. mega-corporations, the next stage in activist hedge fund investing.
Last month, Bill Ackman told investors that he was planning a large investment that he would announce in a few months. The latest bond offering was given the second-lowest investment grade by Standard & Poor’s and the third-lowest investment grade rating by Fitch.
Interestingly, the use of public note offerings by hedge funds to raise capital is not new. In 2006, Ken Griffin’s Citadel was the first to do so when it raised $500 million in senior notes.