Citadel Investment Group has carved out a niche for itself, buying the assets of distressed and collapsing money managers for pennies. But it may have a fight on its hands over its most recent discount deal.
The Chicago-based giant agreed this week to buy some $500 million in assets from money manager Sentinel Management Group at roughly a 10% discount, the Chicago Tribune reports. Sentinel froze redemptions in its daily-liquidity funds this week, after it, like many others, faced problems in its credit portfolio.
But one Sentinel investor, clearing firm Penson Worldwide, isn’t happy and plans to sue to stop the transaction.
Dallas-based Penson said it stands to lose some $6.5 million in the deal, which it said gave Citadel a 30% discount. It accused Sentinel of selling its assets—government and corporate bonds—“without notice and in breach of contract.”
“To liquidate such a portfolio at such a discount to market value constitutes, among other things, a reckless disregard of industry fair practice,” Penson said in a statement. “It is our intention to pursue all legal remedies against Sentinel, Citadel and related parties.”
The deal for Sentinel’s assets follows Citadel’s purchase of portfolios from both Amaranth Advisors and Sowood Capital Management as those firms crumbled.