Antara Borrowed from Long Time Investor Corbin as Other Financing Dried Up
Gulati's fund pledged management fees, legal settlements and bank debt to get loans
After suffering two straight losing years and a wave of investor redemptions, Himanshu Gulati’s Antara Capital hedge fund was short on cash and long on investments that had become hard to sell.
That’s when a long-time backer turned into a lender of last resort.
Corbin Capital Partners LP, one of two founding investors at Antara, has made a series of loans to Gulati’s main fund since the second quarter of 2024. In return, Antara has turned over an array of assets to Corbin as collateral, including bank loans, stakes in legal settlements, and even a share of Antara’s management fees.
Only months earlier, Gulati had persuaded investors to let him lock down roughly $500 million of less-liquid assets, including those in his flagship Antara Capital Master Fund. By agreeing to delay their requests to pull money from the fund, investors would give Antara more time to divest these assets, the firm said, thereby avoiding a fire sale and ultimately generating higher returns.
At issue is whether Antara used the assets in this side pocket as the collateral for the loans, and if so, what the firm did with the proceeds from the borrowings. Another question revolves around the terms of the loans, which haven’t been made public. That makes it hard to tell whether Corbin is trying to help Antara work through its dilemma or is getting deals that could generate big profits even if the hedge fund defaults on the debt. Or both.
Gulati didn’t return telephone calls and texts seeking comment, nor did Lance Kravitz, the firm’s former chief financial officer, or Raph Posner, its one-time general counsel; a Corbin spokesperson declined to comment. This article is based on information from regulatory filings and interviews with six people familiar with the situation who requested anonymity to discuss Antara and Corbin.
Dubin & Swieca
New York-based Corbin, which oversees almost $10 billion in assets, has a storied history. Founded in 1984 by Glenn Dubin and Henry Swieca, the firm was one of the earlier fund-of-funds – the term for investment vehicles that allocate their capital among outside portfolio managers. Then known as Dubin & Swieca Capital Management, the fund of funds backed industry titans such as Paul Tudor Jones, Louis Bacon and Andreas Halvorsen from day one.
Photo by Charles Parker
The two founders, who would go on to start Highbridge Capital Management and then sell it to JPMorgan Chase & Co., eventually exited the firm, which changed its name to Corbin in 2005. Corbin is now run by Tracy Stuart as chief executive officer and Craig Bergstrom as chief investment officer.
Gulati, a tennis enthusiast, has a rags-to-riches background. He was a toddler when his family of four arrived in the US with less than $86, Gulati said during a November 2021 interview on the podcast Capital Allocators with Ted Seides. The entire family initially lived in a 400-square-foot apartment. Gulati as a kid turned his hobby of collecting sports cards into a trading business, eventually generating enough revenue to pay his way through college.
“Having come from nothing,’’ Gulati said on the podcast, ``I do feel privileged to have this opportunity to be able to invest and invest on behalf of institutions, endowments, foundations. I can look at having had nothing and realize how important it is to preserve capital and how important it is to have a protective mindset for investors.’’
In 2006, Gulati joined the former Perry Corp. as an analyst, eventually working his way up to become the managing partner in charge of credit and event driven equities. He left after nine years to become the head of distressed credit at Man GLG.
Bergstrom, who gets high marks from people in the industry as level headed and good to work with, said during the 2021 podcast with Gulati that he had a history of investing with the hedge fund manager. That was what led Corbin to join a unit of Blackstone Inc. in backing Gulati when he left Man GLG to start Antara in 2018.
Swing for the Fences
``The driver of our relationship and conviction came from a pretty lengthy series of co-investments in individual situations over a long period of time,’’ Bergstrom said on the Capital Allocators podcast, which he also joined as a participant. ``We want someone who swings pretty hard on their best ideas,’’ Bergstrom said later in the podcast.
Antara signed on as a sub-adviser to a pair of Corbin opportunity funds, one of which is structured for institutional investors that are subject to the federal ERISA rules governing retirement plans. In general, Gulati invested the Corbin funds’ capital in the same securities that his own Antara Capital Master Fund was buying, though on a much smaller scale, regulatory filings show.
There were also other ways that Corbin bet alongside Antara and Gulati. During 2021, for example, Corbin Capital Partners acquired 4.5 million shares in one of Gulati’s most high profile gambits: Slam Corp., the special purpose acquisition company that the fund manager set up together with former New York Yankees slugger Alex Rodriguez.
Photo by Sean Ingram
In terms of dollars, it’s unclear how much money Corbin allocated to Antara. A person familiar with the situation estimated the total was at most $50 million. Bergstrom during the November 2021 podcast described Corbin’s allocation to Antara as ``medium-sized.’’
``It’s not as big as someone who runs a somewhat more diversified portfolio or someone who is much more orthogonal to the rest of our portfolio,’’ Bergstrom said. ``But it’s certainly sized reflecting significant investment conviction for us.’’
It was initially a winning bet. Antara’s regulatory assets under management, including the use of leverage, soared to $2.9 billion at the end of 2021 from about $400 million at the same point in 2018, according to Securities and Exchange Commission records. Expecting such asset growth to continue, Antara made several outsized bets on individual companies during 2022, including a $300 million investment in ChargePoint Holdings Inc. and a $200 million wager on Nikola Corp.
Consecutive losses
While both of these investments were initially a home run, Antara’s main fund ended up losing more than 14% in 2022, the year that the Federal Reserve surprised Wall Street with a series of interest rate hikes. Nevertheless, the fund outperformed the overall stock market, as measured by the Standard & Poor’s 500 Index’s decline of almost 20%.
During 2023, however, Antara fell another 17.7%, even though the Standard & Poor’s 500 Index roared back with a 24% gain for the year. The reason for Antara’s 2023 losses is the subject of debate.
Some people said that paper losses on the firm’s less liquid assets amid the 2022 interest rate changes prevented the firm from shifting into equities when the bull market heated up. Others said that the 2023 losses stemmed from trading in areas such as risk arbitrage and equity options, coupled with the firm’s heavy use of leverage; at the end of 2023, Antara’s net assets totaled about $1.3 billion but its regulatory assets – a measure that incorporates the use of leverage – totaled about $2.0 billion.
After two consecutive down years, Antara’s investors began seeking their money back. Faced with the prospect of selling investments at distressed prices to fund more redemptions, Antara got investor approval to segregate its less liquid assets into a separate account known as a side pocket. This effectively froze client redemptions on the assets, giving Gulati more time to sell them and hopefully maximize returns for his clients.
Another problem had cropped up though. As Antara’s assets became less liquid, it became more difficult for the firm to get margin financing from traditional prime brokers. Several of Antara’s original prime brokers, including Morgan Stanley and JPMorgan, were no longer listed as working with the money manager at the end of 2023.
As a result, Gulati had to find alternative financing. Antara’s flagship fund initially entered into a deal with Jefferies Leveraged Credit Products that was structured like a repurchase agreement, according to a March 2024 regulatory filing. Jefferies purchased assets from the Antara master fund – including its stake in a bank loan extended to department store operator Belk Inc. – at a deep discount to their actual value.
Pinehurst Partners
Antara then entered into a series of financing deals with Pinehurst Partners, one of Corbin’s original investment funds, filings show. Under these agreements, Antara’s main fund posted a wide range of assets to Pinehurst as collateral, according to the filings, including:
Antara’s stake in a multibillion-dollar judgment that Argentina has been ordered to pay to minority shareholders of YPF, the country’s government-owned oil company.
4 million shares of preferred stock issued by Bombardier Inc.,
A $3.5 million litigation receivable from Arrival, a bankrupt electric vehicle company that had agreed to settle of a class action lawsuit for more than $13 million.
50% of all management fees payable by the Antara master fund to Antara Capital.
A stake in Lynk Global Inc., including any benefit arising from Lynk’s proposed merger with Slam Corp.
It’s unclear how much money Pinehurst lent against each of these assets. If the loan represented only a fraction of their potential value, and Antara was unable to pay back the financing, Pinehurst would get to keep the collateral and sell it, potentially for far more than the amount of the loan.
That would make up for any misjudgment Corbin exercised when it initially agreed to back Antara.
``It’s really hard to ex-ante judge portfolio management and risk management skills with any great degree of confidence,’’ Bergstrom said in the Ted Seides podcast. “But we had a lot of the important inputs and we felt like that, combined with experience and philosophy, left us pretty comfortable’’ with Antara.