George Soros, JPM and Other Big Players Are Buying Italian Debt

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George Soros isn’t the only fan of Jon Corzine’s European bonds.

J.P Morgan Chase & Co. and at least one large hedge fund bought Italian bonds that until recently were owned by MF Global Holdings Ltd., the bonds that played a key role in pushing the securities firm formerly run by Mr. Corzine into bankruptcy, according to people familiar with the matter.

J.P Morgan and the hedge fund didn’t buy nearly as much as the $2 billion that Mr. Soros spent to buy these bonds. The securities were sold just after MF Global’s Oct. 31 bankruptcy filing under an administrator currently overseeing the firm, according to the people.

Still, the purchases highlight the hefty profits that could come from these bonds. Mr. Soros’s family fund, Soros Fund Management LLC, currently is up more than $130 million based on the marked-down prices paid for the bonds, according to a trader who bought some of the same bonds, though it is hard to put an exact value on the complicated trade.

Buyers paid about 89 cents on the dollar for the Italian bonds, compared with a market price of about 94 cents at the time, according to the trader who bought them. There also are possible ways to protect against losses from the bonds, another reason some were excited to bid for them, according to the trader and others familiar with the trade.

The bonds are no sure thing, however. For one, it may be difficult to sell this particular batch of bonds before they mature in December 2012, according to the trader who purchased the same bonds.

Just as important, the trader and others say, investors remain on edge amid the European debt crisis. Even if a firm hedged its positions to limit downside, they say, word that a firm took a new position in Italian bonds—especially the very debt that led to MF Global’s crumbling—could set off market jitters about the investor. That is why a number of investment firms passed on buying the bonds, according to people familiar with the situation. It also explains why hedge funds, which don’t have shareholders to worry about, were more comfortable buying these bonds.

In the aftermath of MF Global’s bankruptcy filing, $4.5 billion of these bonds—mostly Italian short-term debt—was sold by MF Global’s London clearing house, LCH Clearnet, according to a spokeswoman for KPMG LLP, MF Global’s bankruptcy administrator in London. The bonds were sold at a discount to the market price at the time to entice investors to take a chance on them, according to people familiar with the matter.

Full article here-WSJ

If anyone knows which hedge fund this is (I have heard a few names, but not confirmed anything) please email me at jacob(at) All emails are completely confidential

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