Thursday, December 8, 2011

"Luxor Capital Q3 Shareholder Letter: Long Denmark CDSs, Denmark is on Verge of Icelandic Style Crash"

From ValueWalk:
Luxor Capital is a New York based hedge fund started and managed by Christian Leone.  Luxor is a value based fund and does a lot of distressed investing.

The most interesting play now is their short of Danske Bank.

It is what I think is a brilliant thesis to play continued turmoil in Europe in a very savvy manner. Although the write-up is specifically about purchasing Danish CDS, the breakdown of the situation outlines why shorting Danske Bank at this point is an absolute no brainer. For example, even if one assumes a fairy tale ending in Europe (which is almost impossible) Danske should still be toast given any reversion to the mean in the Danish/Copenhagen housing market, which is a near certainty in my mind. If Europe gets out of hand and the cost of wholesale funding goes up (or away altogether) then Danske is a zero even quicker. The letter notes that Denmark’s banking assets-to-GDP is 454%!!!

Interestingly, Cevian Capital, a multi billion dollar UK value hedge fund has bought a huge stake of Danske....MORE
HT: Credit Writedowns who has the backround.