Tricadia Capital - AbsoluteAstronomy.com

History

Tracadia Capital was formed in 2003 by Michael Barnes and Arif Inayatullah (sometimes referred to as Arif Inayat) "to establish a CDO management business and pursue credit arbitrage strategies". As of 2003, Tricadia was owned by Mariner Capital, a fund of funds bond investor with $2.5 billion under management. Barnes had worked with structured finance products at Paine Webber

Paine Webber

Paine Webber and Company was an American stock brokerage and asset management firm that was acquired by the Swiss bank UBS AG in 2000. The company was founded in 1880 in Boston, Massachusetts, by William Alfred Paine and Wallace G. Webber. Operating with two employees, they leased premises at 48...

, UBS

UBS AG

UBS AG is a Swiss global financial services company headquartered in Basel and Zürich, Switzerland, which provides investment banking, asset management, and wealth management services for private, corporate, and institutional clients worldwide, as well as retail clients in Switzerland...

, and Bear Stearns

Bear Stearns

The Bear Stearns Companies, Inc. based in New York City, was a global investment bank and securities trading and brokerage, until its sale to JPMorgan Chase in 2008 during the global financial crisis and recession...

. Inayatullah had worked at Tiptree Financial Partners and with structured credit at UBS

UBS AG

, BroadStreet Group, and Credit Agricole Indosuez. Also involved was Hoggie Kim, who had worked on synthetic CDOs at BroadStreet Group, and Terri Magnani, who had worked with structured products at Merrill Lynch

Merrill Lynch

Merrill Lynch is the wealth management division of Bank of America. With over 15,000 financial advisors and $2.2 trillion in client assets it is the world's largest brokerage. Formerly known as Merrill Lynch & Co., Inc., prior to 2009 the firm was publicly owned and traded on the New York...

. Tricadia was affiliated with Mariner Investment Group, which provided its initial capital and many support services for the company.

In 2004, Tricadia was the first north-American organization to do a "synthetic CDO

Collateralized debt obligation

Collateralized debt obligations are a type of structured asset-backed security with multiple "tranches" that are issued by special purpose entities and collateralized by debt obligations including bonds and loans. Each tranche offers a varying degree of risk and return so as to meet investor demand...

squared" deal, which it did with Citibank

Citibank

Citibank, a major international bank, is the consumer banking arm of financial services giant Citigroup. Citibank was founded in 1812 as the City Bank of New York, later First National City Bank of New York...

.

In November 2006, it had 22 workers (plus support from Mariner staff), managed $7.9 billion assets, 92% of which was its 14 (fourteen) CDOs. It claimed at that point to be using a "buy-and-hold approach to its CDOs and, thus, focused on fundamental credit and quantitative analytics when selecting investments".

Some of its CDOs names were Tricadia CDO 2006-6 Ltd., Tricadia CDO 2006-5 Ltd., Tricadia CDO 2005-4 Ltd., TABS 2005-4 Ltd., TABS 2005-3 Ltd., Tricadia CDO 2005-3 Ltd., Tricadia CDO 2004-2 Ltd., TABS 2005-2 Oakville Ltd., TABS 2004-1 Ltd., and Tricadia CDO 2003-1 Ltd.

Jeffrey Kaplan, of Promethean Investment Group, joined in January 2004.

CDO controversies

According to a 2009 NY Times article, it was one of the many hedge funds involved in creating mortgage-backed collateralized debt obligation

Collateralized debt obligation

s and then betting against them. Tricadia disputes this view. From 2003-2007 Tricadia issued 14 CDOs it called 'TABS', which performed very badly. In 2007/2008, its hedging operation earned 50 percent returns, even as its CDOs tanked. The article also claims that the co-head of the company gave a presentation that "described how a hedge fund could put on a negative mortgage bet by shorting assets to C.D.O. investors". Tricadia disputed the storys implication that it had not operated in the best interest of its investors.

A later Wall Street Journal article from 2010 claimed that Tricadia's CDO unit pushed to create new CDOs in 2007. The article juxtaposes this fact with Tricadia management's description of a scenario where structured credit might collapse in 2007 and create worldwide problems. Also it wrote that Pursuit Partners was suing UBS over bad CDOs, including Tricadia's "TABS 2007-7" CDO. Tricadia disputed the claim, saying that it had operated in the best interests of its investors.

History

CDO controversies

See also