Black Diamond's GSC Deal Approved, Doubles Firm's Assets

Jul 13 2011 | 10:55am ET

A federal bankruptcy judge has approved the sale of collapsed hedge fund GSC Group's assets to its biggest creditor, fellow hedge fund Black Diamond Capital Management.

In his decision this week, U.S. Bankruptcy Judge Arthur Gonzalez in Manhattan rejected a bid by other GSC lenders to reject the sale as overly favorable to Black Diamond. Gonzalez wrote that GSC—headed by a trustee pushed for by the lender group and appointed by Gonzalez—"extensively marketed the assets" and chose the highest bidder.

The unhappy lenders, among them UBS and Credit Agricole, had sought the appointment of a trustee after GSC first agreed to sell itself to Black Diamond. But the trustee, James Garrity, then negotiated a new two-part deal with Black Diamond worth about $275 million, allowing GSC to cover its debts to the hedge fund and leaving some $18 million to pay back other creditors.

With the approval of the deal, Black Diamond takes over funds with some $7 billion in assets under management, more than doubling the firm's assets. Black Diamond said it plans to hire some 15 former GSC employees, including its first employees in the U.K.

"I am extremely pleased that following a long and competitive process, Black Diamond has secured approval to complete the acquisition of GSC's assets, and we look forward to working on behalf of a prestigious group of GSC investors representing significant public and corporate pension plans, insurance companies and other financial institutions, endowments, foundations and family offices globally," Stephen Deckoff, managing principal, said. "Importantly, we believe the transaction will benefit Black Diamond and its investors by enhancing investment and back office resources, adding deal sourcing opportunities and expanding capabilities in Europe, amongst other benefits."

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