A Greenwich, Connecticut-based hedge fund that focuses on distressed credit and special situations is behind the purchase of a block of 46 taxi medallions that were snapped up in a foreclosure auction this week.
The medallions — the metal plates on yellow cab hoods allowing them to legally pick up street-hails — have plunged in value since the arrival of Uber and other ride-sharing services in the city.
They once fetched as much as $US1 million but were sold for $US186,000 each at the auction, an industry source told Business Insider. They once belonged to Evgeny “Gene” Freidman — a man known as the ‘Taxi King’ — who is now in legal and financial trouble as the value of his assets plunged.
The buyer, identified in bankruptcy court documents at MGPE Inc., was incorporated in 2010 by Mark Zoldan, who is chief financial officer of Marblegate Asset Management, legal filings show. We called Marblegate to ask about its strategy with the medallions and how MGPE fits in, but the firm declined to comment.
Hedge funds are closed to most public investors so they only have to disclose a very limited amount of information
Marblegate manages about $US627 million, which could include borrowed money, according to a regulatory filing. Marblegate describes its investment strategy as seeking “to purchase high yield and leveraged corporate credits and claims at a discount to intrinsic value and to realise the value of investments through a combination of restructuring, recovery and refinancing.”
Andrew Milgram and Paul Arrouet are the firm’s managing partners with Milgram serving as the chief investment officer — meaning they’re the ones making investment strategy decisions.
Of course, we can’t say what MGPE’s strategy with the medallions is — but there are more ways than one to make a profit off this purchase. For one, because they were bought in a foreclosure auction and in a large block, the medallions probably went for below what they might fetch in the open market. Also, the medallion owners can generate income by leasing them out to taxi companies or individual drivers — who can’t ply their trade without one.
The $US186,000 medallion price is not expected to become the new normal for future medallion auctions, according to Matthew Daus, who served as head of the Taxi & Limousine Commission for more than eight years.
“These medallions were foreclosed upon as a part of Freidman’s bankruptcy,” said Daus, who currently works for the law firm Windels Marx. “These bulk bargain bids are not indicative of a medallion’s true market value.”
He says hedge funds are a rare sight in the taxi industry.
Then, of course, there’s the potential that this reflects a view that the hit that the taxi industry has taken from Uber is coming to an end, and the medallions will start to regain value.
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