S&P says it may cut Ackman hedge fund's rating

By Svea Herbst-Bayliss
NEW YORK, March 17 (Reuters) - Billionaire investor William
Ackman's already very bad week got worse on Thursday.
Rating agency Standard & Poor's said it may cut its BBB
rating of Ackman's publicly traded Pershing Square (NYSE:SQ) Holdings
PSH.AS vehicle in the wake of weak investment returns and a
sharp drop in its net asset value.
"The fund's performance since we initiated the rating on PSH
in May 2015 has been weaker than peers, in contrast to its
stellar track record in previous years," S&P analysts wrote,
noting that the fund lost money on 11 of 12 positions since
October 2015.
A spokesman for the firm declined to comment.
Ackman's Pershing Square oversees roughly $11 billion for
wealthy clients, including state pension funds.
The fund's net asset value tumbled to $3.8 billion this week
from $5.3 billion in October 2015, the S&P analysts wrote. That
pushed the fund's debt-to-total-assets ratio to more than 20
percent from 15 percent at the end of October 2015.
The most immediate cause for Ackman's woes is the sharp
decline in drug company Valeant Pharmaceuticals' VRX.TO stock
price, which crashed more than 50 percent this week and cause
Ackman's firm to lose roughly $1 billion on paper. The company
delivered worse-than-expected financial guidance and raised the
chance of defaulting on its debt if it breaches agreements with
creditors by not filing its annual report on time.
This year alone, the Pershing Square Holdings fund, which
has been trading publicly since 2014, lost 26.4 percent. That
followed on a 20 percent drop in 2015. The year it was listed in
Amsterdam, it scored a 40 percent gain.
As one of the hedge fund industry's most widely followed
investors, Ackman is now being vilified just as much as he was
celebrated two years ago when he worked with Valeant to try to
buy rival drug company Allergan (NYSE:AGN_pa), in which he owned shares.
Investors are privately saying they are concerned about
Pershing Square's big bet on Valeant. Ackman has scrambled this
week to soothe that concern by sending back-to-back memos urging
clients to call him personally with questions.
S&P underscored his high-profile stature by writing "Bill
Ackman's prominent role exposes the fund to key man risk."
But the analysts noted that Ackman has taken "proactive
steps to respond to the turmoil." On Wednesday the fund sold 20
million shares of snack food maker Mondelez MDLZ.O , increasing
its free cash. Last week Pershing Square Vice Chairman Steve
Fraidin, a veteran mergers and acquisitions lawyer, joined
Valeant's board.