Hedge Fund Run by Seth Klarman ’79 Owns Nearly $1 Billion in Puerto Rican Debt

October 12th, 20177:07 am @

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Seth Klarman ’79, the billionaire investor for whom Cornell’s Klarman Hall is named, reportedly manages a hedge fund that owns nearly $1 billion in Puerto Rican debt, drawing ire from some students and calls to boycott or modify the building.

Klarman manages The Baupost Group, a hedge fund in Boston, which owns $911.6 million in bonds issued by Puerto Rico. The group purchased the debt through a shell company, Decagon Holdings LLC, according to a court filing and a statement The Baupost Group’s spokeswoman issued to The Intercept and CNBC. The spokeswoman, Diana DeSocio, noted to The Intercept that Klarman does not personally hold any Puerto Rican debt.

The Decagon entities, which all use an address in Boston, manage about $469 million in COFINA senior bonds and about $442 million in COFINA subordinate bonds, Reuters reported. They were incorporated in Delaware in 2015, according to the Delaware Department of State entity search.

John McKain, associate vice president of university relations, said Cornell did not have any comment on the revelation. An email sent to The Baupost Group was not returned.

Seth Klarman '79 at a dedication ceremony for Klarman Hall in May of 2016.

Courtesy of Jason Koski / University Photography

Seth Klarman ’79 at a dedication ceremony for Klarman Hall in May of 2016.

Chris Arce ’19, co-president of the Puerto Rican Student Association, said the fact that Klarman holds so much of the U.S. territory’s debt is “saddening for several reasons.”

“To hear that one of the main buildings on campus has a connection to that debt crisis, it’s frustrating,” Arce told The Sun.

Matthew Indimine ’18, a member of the Student Assembly, called for students to boycott the building in a public Facebook post. He said in the post that a resolution is “soon to be in the works.”

Klarman is a major political donor, giving the maximum amount allowed to both Hillary Clinton and Marco Rubio in 2016, and is a cofounder of The Times of Israel website, according to Haaretz, a newspaper in Israel. Forbes estimated his net worth at $1.5 billion this year.

Klarman Hall, which the University said cost $61 million to build, opened in January of 2016 and currently houses the Temple of Zeus cafe. At a ceremony in May of 2016, Klarman said students “must bring speakers to campus, to Klarman Hall, with diverse ideas, speakers who will challenge people’s beliefs and moral perceptions, raise ideas and even say outrageous things.”

“You must bring them, even if what they say will be hard for some to hear,” he said, The Sun reported.

Seth Klarman '79, pictured at the Klarman Hall dedication in 2016.

Brittany Chew / Sun File Photo

Seth Klarman ’79, pictured at the Klarman Hall dedication in 2016.

Arce, who has family in Puerto Rico, said mainlanders are “constantly forgetting that there are people behind these [debt] numbers and people whose lives are impacted.” Cornell, he said, should create some kind of physical marker in Klarman Hall honoring Puerto Rico.

“Regardless how one feels about Seth Klarman, there is no denying that because the building is named after him, the building is tied to the debt crisis,” Arce said, “and it would be a shame if the building, tied to the debt crisis, had no recognition of Puerto Ricans.”

The Puerto Rican Sales Tax Financing Corporation issues the COFINA bonds to “provide funds for the Commonwealth of Puerto Rico to repay certain debt obligations,” according to the Puerto Rican government.

The austerity crisis in Puerto Rico has hindered the territory’s ability to recover from Hurricane Maria, Reuters reported, as the Puerto Rico Electric Power Authority, responsible for restoring power to its citizens, went bankrupt in July.

The Intercept speculated that its revelation could lead to political consequences for Klarman, in part because Boston has a large Puerto Rican community.

“Our work right now will be about activating our community in Boston, letting them know [Klarman] has been hiding and making sure we go to his houses and his companies to hold them accountable,” Julio López Varona, member of the HedgeClippers coalition, an organization committed to reduce the power of hedge funds, told The Intercept.

 

Article source: http://cornellsun.com/2017/10/12/klarman-79-reportedly-managing-over-900m-in-puerto-rican-debt/