VR Global’s Richard Deitz profits from active role in Ukraine

One Legend who has been doing really well this year is Richard Deitz. His VR Global fund is up almost 15% year-to-date. He has achieved this result in largely overlooked areas that have been immunized from the general markets gyrations. Areas like Argentina, Greece and even Iraq. It’s Deitz’ positions in Ukraine that have been driving the performance as of late as he has gradually moved his fund for about a third into Eastern Europe and has taken up an active role in several corporate restructurings which is now paying off.

The bulk of the returns VR has been reaping from the area arose from restructuring situations in which Mr. Deitz is playing an active role. Not many funds have as firm a history in Eastern Europe as Mr. Deitz who was a founding partner of Russia’s Renaissance Capital bank and has run his hedge fund from Moscow for the first 15 years.

Mr. Deitz is on the credit committee of several companies in Ukraine and Russia, one of which is a leading mining and steel company and Ukraine’s largest exporter. The noteholder group on which he serves reached a deal with the company in May under which maturities would be increased, bond coupons would be increased and no principal write-off would take place. Bonds have rallied from the low 40s in February to the high 80s in October.

Deitz is also on the noteholder steering committee of a Ukrainian energy company currently under protection from creditors. In total, the company’s financial debts subject to restructuring are over $2billion. It released a proposal to noteholders in September, also with no principal haircut, but extension of maturity. The proposal was not endorsed and negotiations have continued. In the mean-time notes have rallied from a low of 35 in March to over 80 end of October, rallying over 15% this month alone.