The two main reasons for the imminent collapse of New Jersey public pensions are the massive benefits promised but unfunded that the state can’t walk away from and the junk that now sits in the pension ‘trust’ made up of all those ‘alternative investments’ acquired for their inflated carrying values. On Monday Moody’s and the Carlyle Group pulled aside the veil a bit more.
Accordi9ng to a northjersey.com story:
New Jersey’s low-end credit rating could continue to fall if the state Supreme Court rules that retired public workers are entitled to yearly increases in their pensions, according to Moody’s Investors Service.
A lawsuit challenging one of Governor Christie’s pension-reform laws is pending at the high court, specifically over a section that froze pensioners’ yearly cost-of-living adjustments. The court is expected to hear oral argument during its new term, which begins next month.
Analysts at Moody’s issued a rare warning on Monday. New Jersey’s “A2” credit rating, one of the lowest in the country for a state, could go down once again if Christie received “an unfavorable court decision in the pension litigation regarding COLAs,” Moody’s said.
According to a Wall Street Journal story:
Investors are preparing to pull roughly half their money from Claren Road Asset Management LLC, the latest blow for Carlyle Group LP’s hedge-fund firm.
Clients of Claren Road have requested nearly $2 billion of their money back from the New York firm, Carlyle said in a regulatory filing Monday. The money is scheduled to be paid back after Sept. 30, said a person familiar with the matter. The firm managed about $4.1 billion at the end of July.
The “carrying value” of Carlyle’s investment in Claren Road has fallen from $216 million as of June 30 to potentially nothing or as much as $75 million, the private-equity firm said in its filing. It expects to take a noncash charge in the third quarter of between $100 million and $175 million that involves a “high degree of judgment” and could change.
Investment: Claren Road Credit Master Fund
Year bought: 2012
Initial Investment: $250,000,000
Still invested: $263,644,276
Category: Hedge Fund
Another quarter billion dollars (plus fees) that won’t be there to pay those skipped COLA payments that the courts will likely reinstate.