Markets & Stocks
Pay back for LTCM
July 6, 1999: 7:21 p.m. ET

Original investors to get $300 million, banks to pocket $1 billion
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NEW YORK (CNNfn) - Long-Term Capital Management, the hedge fund that required a $3.6 billion bailout from Wall Street's top investment banks last year, announced plans Tuesday to pay back approximately $1.3 billion to investors.
     Under the plan, LTCM will return $1 billion to the consortium of banks that provided the equity infusion last September. Another $300 million will be provided to investors other than LTCM insiders and affiliates, allowing them to exit the fund.
     The move comes as the fund's performance has shown dramatic improvement this year, rising 14.1 percent since the bailout last September.
     "This is tangible evidence of the significant risk reduction program that has been achieved," Peter Rosenthal, a spokesman for the consortium, said in a statement. "After this capital return, the portfolio remains more than adequately capitalized."
     Rosenthal said, for the most part, investors who joined the fund in 1994 would exit with an average gain of about 18 percent per year. However, since January 1, 1998 the investors would have suffered significant losses.
     The Greenwich, Conn.-based hedge fund, founded by former Salomon Inc. Vice Chairman John Meriwether, roiled markets last fall when it was nearly forced to liquidate billions of dollars in investments to meet minimum capital requirements before the Federal Reserve stepped in to negotiate a bail-out plan.
     The decision to pay back investors comes amid reports Meriwether plans to wind down the fund and start a new venture. Rosenthal declined to comment on Meriwether's plans.
     The 14 investment banks that helped bail the fund out last September --include Merrill Lynch & Co (MER), Goldman Sachs (GS), Morgan Stanley Dean Witter and USB Securities. Back to top


LTCM seeks financing - Oct. 28, 1998

LTCM to repay debts - June 18, 1999