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Avenue Capital bets on Covid-19 insurance claims

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Several prominent hedge funds are making bets on Covid-19 business-interruption claims – the most prominent being a roughly $2 billion pandemic-related claim by Caesars Entertainment – despite a string of losses in state and federal courts, according to a report by the Wall Street Journal.

The report cites anonymous sources as revealing that distressed debt specialist Avenue Capital Group has paid roughly 10 cents on the dollar for a $330 million share of the claim filed by the casino and hotel owner in 2021 against a group of insurers including Allianz SE, Chubb Ltd, Markel Corp subsidiaries, and Aspen Insurance Holdings.

Avenue has subsequently sold off parts of that stake to JP Morgan’s Highbridge Capital Management, and Saba Capital Management, with the funds betting that Caesars will eventually win its legal action or land a large out-of-court settlement.

The report cites data from a Covid-19 litigation-tracking effort at the University of Pennsylvania Carey Law School as revealing that, to date, while more than 2,300 Covid-19-related insurance disputes have landed in state and federal courts nationwide, there have only been 99 policyholder wins with the courts granting 967 motions to dismiss or summary judgements.

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