Pirate Suspends Withdrawals For Dwindling Activist Hedge Funds

Sep 11 2007 | 1:01pm ET

Pirate Capital has halted withdrawals from two of its hedge funds as the activist manager continues to hemorrhage assets.

The Norwalk, Conn.-based hedge fund manager, which has seen 80% of its assets evaporate in the past 12 months, designated four stocks held by its two Jolly Roger Activist funds as “special investments,” according to an Aug. 31 letter to investors obtained by Bloomberg News.

The stocks weren’t identified in the letter, but the $100 million activist funds’ top four holdings account for 96% of Pirate’s equity portfolio.

Investors will be barred from withdrawals until the “special investments” are sold.

“In view of the activist nature of the funds, prior redemptions, market turmoil and their effect on the funds’ individual positions and portfolios as a whole, we determined that the best way to manage the positions is through the Special Investment designation,” Pirate founder Thomas Hudson wrote in the letter. The firm, which once managed as much as $1.8 billion, has just $375 million in client assets left.

The activist funds, which have seen assets fall by one-third since March 2006, recorded a roughly 1% loss in the first six months of the year.

Pirate’s larger Jolly Roger funds are not suspending withdrawals. They were up about 1.5% in the first half.

But Pirate’s internal troubles aren’t keeping Hudson from what he does best: hounding the not-so-fantastic four.

Hudson fired off a letter—rife with his trademark all-caps statements for emphasis—to shareholders of uniform and linen provider Angelica Corp., imploring them to elect him and another Pirate nominee to the company’s board.

“The recent announcement of Angelica Corporation’s dismal operating results only highlights what we believe to be a clear need for changes at the Company,” he wrote.

“WE BELIEVE THE NEXT 12 MONTHS ARE CRITICAL FOR ANGELICA: THE BLEEDING MUST STOP,” he added, in typically understated fashion.

Pirate is Angelica’s second-largest shareholder with a 9.8% stake. Hudson, who called the company’s performance “COMPLETELY UNACCEPTABLE,” is pushing for election at the company’s annual meeting, on Oct. 30 in Clayton, Mo.

RELATED STORIES

Pirate Capital Sees Assets Walk The Plank
Hudson Trades Barbs With Target
Pirate's Hudson Hits Uniform Co. With Sale Demand


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