Third Avenue Management LLC has reached an agreement with the Securities and Exchange Commission to provide investors with updated values on its Third Avenue Focused Credit Fund, as the firm unwinds the troubled fund over the next year or so.
Third Avenue said Wednesday afternoon it obtained "exemptive relief" from the SEC allowing the firm to shift assets back into the $789 million junk-bond fund. The firm last week placed the assets in a liquidating trust while suspending redemptions, a move securities lawyers and mutual-fund-industry officials called highly unorthodox. The move helped fuel a junk-bond market selloff amid a wave of investor withdrawals from poorly performing funds.
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The deal with the SEC means investors will continue to be blocked from withdrawing their investments in the fund and may not receive all their money back for months, if not more, as the fund slowly sells assets and returns cash.
But the investors, who are expected to receive a first cash payment today, now will be able to see updated, daily net-asset values for their holdings, something they wouldn't have been able to obtain had the assets remained in the trust. Third Avenue won't charge a management fee as the fund's assets are sold.
As a result of the exemptive order and continuing to block investors from withdrawing money, the fund "will be able to conduct an orderly liquidation without having to resort to forced selling of securities at reduced or disadvantaged prices," Third Avenue said in a statement.
Last Thursday, Third Avenue, founded by Martin Whitman, moved to bar investor withdrawals while it placed the credit fund's assets in a trust that would be liquidated over time, highlighting the severity of the monthslong junk-bond plunge sweeping Wall Street.
At the time, Third Avenue said poor bond-market trading conditions made it almost impossible to raise sufficient cash to meet redemption demands from investors without resorting to fire sales of assets.
By Gregory Zuckerman