Brit Energy meltdown after hedge fund sells

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The Independent Online

An American hedge fund which mysteriously appeared on British Energy's share register last Friday as the owner of a 4.56 per cent stake just as swiftly disappeared yesterday, netting a £1.4m profit.

Apaloosa Investment Management, which bought 28 million shares in the nuclear generator last week at about 5.5p a share, said yesterday it no longer held a "notifiable interest" in British Energy.

British Energy shares, which had doubled in value to 10.25p following news of Apaloosa's stake building, yesterday tumbled by a third to close 3.35p down at 6.9p amid more heavy trading.

The sale of the fund's interest would appear to confirm British Energy's suspicions that the deals were an exercise in ramping the shares. When Apaloosa's holding was disclosed, there was speculation that it was preparing to challenge the government-backed restructuring of the company to obtain a better deal for shareholders. It was reported that Apaloosa had retained a US law firm, Bingham McCutcheon, which specialises in financial restructuring.

Under the restructuring, shareholders will be left with just 2.5 per cent of the company while banks and bondholders will have 97.5 per cent. The Government has agreed to take on £4bn of British Energy's liabilities in return for the right to 65 per cent of its free cash flows. These will be paid into a nuclear liabilities fund to help cover the costs of decommissioning stations and dealing with spent fuel.