Tags: Hayman | GM | government | stake

Kyle Bass' Hayman Capital Management Said to Take Stake in GM as US Exits

Wednesday, 04 December 2013 11:36 AM

Hayman Capital Management LP has taken a stake in General Motors Co., said a person familiar with the matter. The automaker is poised to appreciate as the U.S. government winds down its ownership stake, the hedge fund said.

The largest U.S. automaker should increase in value by more than 40 percent in 12 to 18 months, Hayman Capital said in a presentation published on website HVST.com. The GM stake is one of the fund’s largest investments, said the person, who asked not to be identified because the matter is private.

“GM equity represents one of the most compelling risk/reward situations of any large cap in the world today,” the Dallas-based fund founded by J. Kyle Bass said in the presentation. “Detroit is back. And GM could lead the way forward on the equity front.”

The U.S. Treasury expects to sell its remaining 31.1 million GM common shares by year-end, depending on market conditions, the government said last month. The sale would come after almost half a decade of U.S. government oversight following its 2008 bailout and 2009 bankruptcy. Bass, known for his prescient bet against subprime home mortgages before the financial crisis, sees the U.S. exit as a trigger for the stock.

“The U.S. government will be out of the way before the end of the year,” Bass said in a telephone interview. “They’ve been a source of constant selling pressure in the equity this year.”

Shares Rising

Shares of Detroit-based GM rose 2.6 percent to $39.12 at 10:44 a.m. The stock gained 32 percent so far this year through yesterday, outpacing a 26 percent gain by the Standard & Poor’s 500 Index.

GM should “at least trade in line” with its auto peers, according to the Hayman presentation. GM trades at 3 times earnings before interest, taxes, depreciation and amortization, while Dearborn, Michigan-based Ford Motor Co. trades at 4.4 times Ebitda, Bass said.

“A strong case can be made that GM should trade at a premium to the group,” Hayman said. Bolstering that investment argument are the Detroit company’s “unique position and strong underlying fundamentals, a best-in-class leverage to global growth markets, improving operational efficiency from ongoing turnaround efforts and an improving product cadence.”

The automaker isn’t aware of any position Hayman has taken in the company, Dave Roman, a GM spokesman, said in an e-mail.

Confidence Growing

Bass, a hedge fund manager from Dallas, who focuses on corporate turnarounds, came to prominence after successfully betting against subprime mortgages. While the world’s largest financial institutions wrote off more than $80 billion in subprime losses, Bass and others racked up billions in profit.

Confidence in GM has been growing as the U.S. Treasury sells down its stake, helping facilitate a return to the S&P 500. The automaker is introducing 18 new or refreshed vehicles this year in the U.S. and 14 next year as it moves to transform its lineup into one of the freshest in the industry from among the oldest.

The automaker’s shares have risen steadily since the Treasury announced in December that GM was buying back $5.5 billion worth of shares and that it planned to exit the company. GM topped its $33 initial public offering price for the first time in two years in May after reaching a low closing price of $18.90 in July 2012.

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Hayman Capital Management LP has taken a stake in General Motors Co., said a person familiar with the matter.
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2013-36-04
Wednesday, 04 December 2013 11:36 AM
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