Maglan Capital Up 21% In February, Boosted By FairPoint

Mar 9 2015 | 5:02am ET

Event-driven hedge fund Maglan Capital gained 20.84% net during the month of February, fuelled by gains in the broader markets, including one standout position.

FairPoint Communications, the hedge funds largest position, reached an agreement with its striking unionized workforce on February 19, driving share prices higher. Other strong performers for the month included Madalena Energy and SFX Entertainment.

FairPoint became a core position for New York-based Maglan in early 2012 when the stock traded below $5 per share. It is currently trading around $17.50, and Maglan believes it could go to $30 or more.

“We were initially drawn to the senior-secured debt of the company while it was operating in Chapter 11 bankruptcy, as a fulcrum security, with an eye toward converting the debt into equity through the company’s restructuring,” wrote Steven Azarbad, chief investment officer, and David Tawil, president, in a recent investor letter.

“There was, and there still is, no big-bank analyst coverage, and at times there was an eye-popping short-interest level in the stock…We’re accustomed to being contrarian in thought and positioning.”

“In the coming months, the company will generate multiple catalysts that will drive the valuation and stock-price higher. There is a lot of upside to be captured in our FairPoint investment- ~100%+ in a short period of time.

Maglan Capital is an event-driven investment fund with a core focus on all parts of the distressed cycle, investing in liquid instruments across the capital structure of companies approaching or experiencing financial distress, bankruptcy or restructuring.

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