London Lodbrok Capital Hedge Fund Posts 32% Gain for 2021

(Bloomberg) --

Lodbrok Capital LLP’s European Credit Opportunities Fund gained 32% last year thanks to investments on Swiss bakery firm Aryzta AG, U.K. oil services firm Valaris Plc and German industrial property company Deutsche Industrie REIT AG, according to an investor letter.

The London-based hedge fund, with $1.29 billion in assets, now sees opportunities from merger arbitrage in credit, reopening trades, the energy sector and buying convertible debt of likely takeover candidates at a discount, Mikael Brantberg, the firm’s chief investment officer, told investors in the December letter seen by Bloomberg. 

The bumper returns, outstripping 14% for the Bloomberg Special Situations Hedge Fund Index, mirrors profits for some other opportunistic credit funds. CastleKnight Management’s flagship returned a net 64% in its first full year, among the highest reported so far, while Apollo Global Management Inc.’s gained a net 10%.

The largest contributor to Lodbrok’s 2021 return was Aryzta, according to the letter and a person familiar with the matter. The hedge fund, as a Aryzta shareholder and its largest creditor, helped engineer the rejection of a 794 million-Swiss franc ($868 million) takeover offer for the Swiss baker from Elliott Management Corp. 

It pushed instead for the divestment of businesses in the Americas to focus on Europe and Asia, and overhauling the board. The fund has since sold its equity stake and set the stage for refinancing its remaining debt positions, according to the letter to investors. 

Other large contributors were Valaris, where the fund led a capital restructuring to boost the recovery of its bond investment, and Deutsche Industrie. For the latter, Lodbrok was invested in its convertible bonds and profited from an agreed sale of the group.

Its European Credit Opportunities Fund managed $716 million in assets as of December, with the rest across managed accounts and co-investment vehicles.

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