U.S. Markets

Under pressure, Beechwood Re works to minimize Platinum ties

NEW YORK (Reuters) - CNO Financial Group reinsurance provider Beechwood Re sought on Monday to minimize damage from its links to Platinum Partners, the hedge fund manager embroiled in dual federal probes.

Beechwood has since 2014 managed approximately $590 million in assets for CNO, which has come under pressure over Beechwood’s ties to Platinum. New York-based Platinum is being investigated by the Department of Justice and the U.S. Securities and Exchange Commission.

Platinum is in the process of liquidating its main funds, which specialize in high-interest rate loans to small private companies.

CNO shares have fallen about 15 percent in recent weeks following coverage of ties between Platinum and Beechwood in The Wall Street Journal. Fitch Ratings subsequently placed CNO on “rating watch negative,” and CNO said in a regulatory filing that it was auditing Beechwood’s difficult-to-value holdings.

Beechwood said Monday that it was in the process of severing ties to Platinum Partners and that debt linked to the embattled hedge fund manager and its holdings was minimal.

“There has been no apparent negative impact to these loans that represent a small portion of our portfolio; and we continue to be confident in the strong security, strict covenants and over-collateralization we have in place to protect against future potential downside risk,” Beechwood said in a statement.


Beechwood has approximately $40 million in a collateralized loan to one of its hedge funds, Platinum Partners Credit Opportunities, and between 3 percent and 5 percent of its $2.4 billion portfolio has been lent to Platinum-linked businesses, according to a person familiar with the situation.

Beechwood said in its statement the loans are highly rated, secured by hard assets such as bank accounts and equipment and the debt is senior to any Platinum equity in the businesses.

One of the businesses that Beechwood has a loan to is New York-based Agera Energy, according to the person familiar with the situation. A retail supplier of electricity and natural gas, Agera was essentially created by Platinum when it bought the assets of Glacial Energy Holdings out of bankruptcy in 2014 as described in a Reuters Special Report in April.

The report also detailed how a current Platinum executive, David Levy, briefly left Platinum to work at Beechwood, a period that coincided with Beechwood’s purchase of corporate bonds and a vote on those securities that appeared to help Platinum cash in on its investment in the now-bankrupt Black Elk Energy Offshore Operations.

Levy is the nephew of Murray Huberfeld, a longtime affiliate of Platinum who was arrested in June on charges that he bribed a union official to invest in Platinum. Huberfeld recently pleaded not guilty. Representatives for Platinum, led by Mark Nordlicht, and Agera, led by Steven Laker, did not respond to request for comment.

Beechwood added on Monday that it started reducing ties to Platinum in late 2014, around the time that Levy left Beechwood to return to Platinum as Nordlicht’s top investment deputy.

“We have significantly reduced those ties and related loans, and expect to be fully unwound from most Platinum-related loans by the end of 2016,” the Beechwood statement said.

Beechwood, led by Mark Feuer, also noted that it had divested all but one of its minority investors, including all family members of Platinum executives.

Though Beechwood is cutting financial ties with Platinum, Huberfeld’s son-in-law works for an affiliate, B Asset Manager, where Huberfeld’s son was also an intern this year. Huberfeld himself worked for Beechwood last year and had an office there.

Reporting by Lawrence Delevingne; Editing by Lauren LaCapra and Cynthia Osterman