Bill Miller buys JC Penney debt for new high income fund

November 11
8:41 PM 2013

Bill Miller said he purchased JC Penney Co debt for a new fund from Legg Mason Inc. The said fund will be able to make investments in bonds and equities. Miller, whose popularity was spawned by his 15-year record of beating the Standard & Poor's 500 Index, said he and other Legg Mason executives had pooled some of their resources to establish the high-income fund. This was revealed in a conference hed by Charles Schwab Corp in Washington.

Miller told those who attended the conference that the fund purchased some JC Penney bonds with a yield of 12%.  He added, "J.C. Penney has a lot of levers they can pull to get the customers back." According Mary Athridge, the spokeswoman for the fund, Miller will be managing the fund. She added that by the first quarter of next year, the fund may be open for other investors.

According to a Bloomberg report, the behavior of distressed debt buyers said a disagreement existed on whether JC Penney could turn itself around. In recent months, some of the biggest buyers of distressed debt were purchasing the retailer's debts while others were offloading. Sources knowledgeable of the matter told Bloomberg that Avenue Capital Group bought JC Penney unsecured bonds. On the other hand, Third Avenue Management sold majority of its bond holdings.

As the former manager of the Legg Mason Capital Management Value Trust fund, Bill Miller held the longest record of beating the industry's US benchmark. His winning streak ended in 2006.  In May last year, Sam Peters replaced Miller as manager of the value fund. However, Miller still manages the Legg Mason Opportunity Trust valued at USD 1.7 billion. Data gathered by Bloomberg showed that the trust has beat 96% of its competitors by returning 21% yearly in the past five years.

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