Judge Orders Hedge Fund Disclosure in Northwest Case

Filed in archive Hedgetalk on March 13, 2007

Judge Allan Gropper of the U.S. Bankruptcy Court in New York ordered hedge funds to disclose the details of their holdings in northwest airlines. "Any interest that individual committee members may have in keeping this information confidential is overridden."

Gropper's ruling enforces Bankruptcy Rule 2019, which says parties acting as a group must disclose certain information about their holdings. The decision requires the 13 hedge funds on the committee to make public information about trading patterns, holdings and pricing, which hedge funds, as a rule, prefer to keep secret.

The judge denied a request by the hedge fund committee, led by Owl Creek, who argued that forcing sophisticated investors to disclose trade information may hurt the secondary market for trading claims and equity.

Gropper gave the funds until Wednesday to publicly state their stakes in Northwest, along with when and at what price they bought the securities.

Northwest Airlines said that it expected to be worth roughly $7 billion when it emerged from bankruptcy later this year and that it would pay unsecured creditors roughly three-quarters of what they were owed. The unsecured creditors also objected to sealing the documents, arguing that the public had a right to know how the hedge funds came to own about $264.7 million in claims, 30% of the airline's stock.

The hedge fund group collectively owns about 23 million Northwest shares, according to a court filing in January.