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Thursday, February 04, 2016

Healey Downplays Third Avenue's Class-Action Woes

News summary by MFWire's editors

Sean Healey says that Third Avenue's [profile] financial and legal woes won't hurt AMG much at all. Plus, he sees the stumbling value shop turning things around and not having "any legal exposure", either. Meanwhile, more class-action lawyers are circling Third Avenue.

Sean Healey
Chairman, Chief Executive Officer
Yesterday on AMG's Q4 2015 earnings call (see Seeking Alpha's transcript of the call), AMG chairman and CEO Healey tackled the woes of AMG affiliate Third Avenue head on, in response to questions from Deutsche Bank Securities analyst Brian Bedell. Tim McLaughlin of Reuters reported on Healey's remarks.

Healey acknowledged that "it has been a difficult period for Third Avenue." Yet he made several points downplaying the Third Avenue situation.. One, he said, "there is a clear trend toward the outflows moderating."

Two, he feels "terrific about the firm's prospects and their financial and operating position". He has "every confidence" in the Third Avenue management team's ability to "generate excellent performance," which will translate into Third Avenue's rough patch "bottoming and then recovering."

Three, it's not like Third Avenue is a huge part of AMG as it is. Healey told the analysts that "Third Avenue is, from a run rate earnings contribution standpoint, 1% of our earnings, so really no impact to AMG's financials from their results."

Fourth, putative class-action lawsuits be damned, Healey thinks the Third Avenue folks are in the clear legally.

"You didn't ask this, but to the extent anybody has a question, we don't think that Third Avenue has any legal exposure around the Focused Credit Fund closure, et cetera," Healey said on the call.

And fifth, Healey sees as protected from Third Avenue's legal fights.

"We are completely comfortable that AMG has no legal exposure at all, given our structure and approach," Healey said.

Meanwhile, last week San Francisco-based Sparer Law Group filed its own lawsuit on behalf of Third Avenue Focused Credit Fund investors, claiming that the prospectus and other materials for the fund "contained material false or misleading statements regarding the Fund's liquidity." The new suit came 12 days after a New York law firm filed a putative class-action accusing the Third Avenue folks of gross negligence for not maintaing adequate liquidity to protect the now-defunct Third Avenue Focused Credit Fund.

"This was a hedge fund masquerading as a mutual fund," states Alan Sparer, lead counsel for the new suit.

Other law firms are getting in on the fight, too. Those firms include: New York-based Levi & Korsinsky, Los Angeles-based Glancy Prongay & Murray, New York-based Gainey McKenna & Egleston, San Diego-based Robbins Geller Rudman & Dowd, and New York-based Bernstein Liebhard

Edited by: Neil Anderson, Managing Editor

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