On a day when the stock markets are primed for another fall, the WSJ Fund Track
revisits the fight over the remains of The Reserve's money funds. The column documents the efforts of Western Union International Ltd.
to recoup $298.1 million of principal and interest it held in the Reserve International Liquidity Fund
. That fund operated under the laws of the British Virgin Islands.
The Western Union subsidiary is battling two hedge funds -- Caxton International Ltd.
and Caxton Equity Growth Holdings LP
-- that have block redemptions from the International Liquidity Fund, which broke the buck on September 16, a day after the SEC-registered Reserve Primary Fund. Reserve management is expecting to distribute $25 billion from the Primary Fund as soon as the end of next week.
Caxton's lawyers at Kasowitz Benson Torres & Friedman LLP claim that Reserve allowed some investors to unfairly redeem shares from on Sept. 15 at the full $1 NAV.
While Western Union International claims it placed its redemption request in a timely fashion, Caxton is arguing that the fund's assets should be proportionally divided among shareholders and that a receiver should oversee the distributions.
Reserve Management filed a court argument that the Caxton request for a receiver and fund accounting is "unwarranted and, at best, grossly premature." It adds that: "There is no allegation or evidence that the assets of the International fund are being fraudulently transferred or diminished."
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