It's been a tough year for John Taylor [3] - cursed by the CNBC Squawk Master monicker - but it appears to be getting worse. As Hedge Fund Alert reports [4], less than a year before his currency-trading shop filed for bankruptcy, the FX Concepts founder personally guaranteed a chunk of the debt his firm owes to its largest creditor. AMF, the Credit Suisse hedge fund incubator, is owed $34.4 million with Taylor on the hook for $5 million and "is going to clearly try to get the money out of John," but, "by any stretch of the imagination, it's not there." Recent court documents suggest the fund was in even worse shape than previously understood as the liquidation of FX Concepts' four main assets is ongoing but as a whole, however, the trading programs probably are worth little, one source said. “If their models worked, they would have produced returns,” he said. “Their brand has no value, unless you want to advertise negative returns.”
Less than a year before his currency-trading shop filed for bankruptcy, FX Concepts founder John Taylor personally guaranteed a chunk of the debt his firm owes to its largest creditor.
Asset Management Finance, a Credit Suisse unit that has invested in a number of prominent hedge fund-management firms in the past decade, provided $40 million of debt financing to FX Concepts via two revenue-sharing agreements in 2006 and 2010. But in December 2012, as opportunities in the currency market continued to fade and redemptions mounted, Taylor was forced to renegotiate the financing package. The Credit Suisse unit agreed to defer eight quarterly revenue-sharing payments in exchange for Taylor’s personal guarantee for those obligations. As of Oct. 17, when the firm filed for Chapter 11, FX Concepts owed Asset Management Finance $34.4 million, with Taylor on the hook for $5 million of the total.
“AMF is going to clearly try to get money out of John,” a source said. “By any stretch of the imagination, it’s not there.”
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The liquidation of FX Concepts’ assets is being handled by restructuring specialist CDG Group, which has begun reaching out to some 40 other currency managers, as well as to current and former FX Concepts executives. On the block are four assets: trading technology encompassing 148 distinct programs; a database covering 30-plus years of currency prices and other historical data; a daily newsletter that Taylor has published since 1981; and the FX Concepts trademark. Among the trading programs is the firm’s flagship Global Currency Program, which was down 13.9% this year through August. Other programs have been more profitable — with one automated-trading model generating a 50% gain through September.
As a whole, however, the trading programs probably are worth little, one source said. “If their models worked, they would have produced returns,” he said. “Their brand has no value, unless you want to advertise negative returns.”
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What’s known is that the proceeds of the 2010 financing package were paid out to Taylor as an advance on his equity in the business. He used the money to buy his condo, reportedly paying $22 million — or $4.5 million more than the asking price. At the same time, Taylor has spent significant amounts of his own money funding research into hemophilia, which afflicts one of his children.
Sadly, it seems once again that the inverse correlation between hedge fund performance and frequency of appearance on CNBC has proved itself...