(The following story by Christopher Faille appeared at BlackEnterprise.com on March 7.)
WASHINGTON, D.C. — It has been almost three years now since Germany’s former Labour Minister, Franz Mntefering referred to foreign financial institutions in general, hedge funds and private equity firms more specifically, and hedge fund The Children’s Investment Fund in particular, as “locusts” for their dealings with German public companies and their effects on that country’s capital markets.
As it turns out this non-eristic metaphor has achieved an enduring transatlantic life, popping up again in a hearing room Wednesday [March 5] on Capitol Hill.
The House of Representatives’ subcommittee on railroads held a hearing largely devoted to the excoriation of the “wrong sort” of investors in rails. In her opening statement Rep. Corrine Brown (D- Fla.) praised one railroad in particular, CSX Corp., “headquartered in my hometown of Jacksonville, Fla.,” which employs more than 5,000 people “who play a vital role in the local and state economy.” Her statement portrayed the railroad as threatened by the machinations of hedge funds and other short-term investors that don’t have the long-term interests of the rail industry in mind.
In this context, she observed pointedly that U.K.-based TCI, one of the funds investing in CSX, “has been referred to as a locust’ by the German government and has met serious resistance from the Japanese government, where they are trying to force higher energy prices on Japanese citizens through their partial ownership of J- Power.”
Rep. James Oberstar (D-Minn.), the chairman of the House Transportation Committee, didn’t use any insectile metaphors in his statement, but he did say that a number of the demands TCI is making of CSX are, from the point of view of public policy, disconcerting, i.e., “diverting capital expenditure investment for stock buybacks or freezing capital spending in the face of an uncertain regulatory environment.”
TCI founding partner Snehal Amin was present to face his congressional critics. When subcommittee member Steven LaTourette (R- Ohio) asked whether it was “coincidence” that TCI is investing in CSX at the same time as two other hedge funds – 3G Capital Partners Ltd. and Atticus Capital LP, both of New York – Mr. Amin replied simply, “The short answer is yes, it is coincidence.”
He then objected to the “insinuation that we’ve worked together as a group.” Mr. LaTourette hastened to say that he had made no such insinuation.
TCI has long taken the position that CSX must improve the way it deals with labor and its shippers as well as with shareholders.
Ms. Brown, who chairs the railroad subcommittee, asked Mr. Amin about “the Japanese situation,” and asked him “to give us a one- minute version I’m just trying to get a pattern of how you operate.” This was a reference to the fact that last month TCI challenged Japan’s attempt to limit foreign investments, seeking in particular to increase its stake in the utility company J-Power.
Mr. Amin assured her that “we’ve never asked for a rate increase in Japan,” only for the opportunity to increase their ownership beyond 10%.