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Hedge funds using debt-trading strategies honed on Wall Street are expanding at a record pace as they profit from risks big banks are no longer taking, Bloomberg News reported yesterday. BlueCrest Capital Management LLP doubled its New York staff in the two years through December, while Pine River Capital Management LP increased its global workforce by one-third in 2012. Hedge-fund firms are hiring from companies such as Deutsche Bank AG, Barclays Plc and Bank of America Corp. as their credit funds have attracted $108 billion since 2009, data compiled by Chicago-based Hedge Fund Research Inc. show. The flow of funds and people is taking place as regulators demand banks curb proprietary trading and back riskier wagers with more capital to prevent another financial crisis. That has allowed so-called shadow-banking firms to expand in businesses contracting at the largest lenders, including distressed-debt trading and fixed-income arbitrage, a strategy that seeks to profit from short-term price differentials. Credit hedge funds, part of a less-regulated shadow-banking system that also includes money-market funds and real estate investment trusts, are still small compared with Wall Street’s largest lenders.

Suntech Power Holdings Co. Ltd, whose main unit is in insolvency proceedings, said that it would delay filing full-year results for 2012 as it needs more time to restate its financial statements for the previous two years, Reuters reported yesterday. Suntech, which said revenue fell by an estimated 48 percent in 2012, had planned to file the restated results by April 30 but said that it would need more time to assess the impact of restructuring at its main unit in China, a moratorium on debt repayments in Europe and more time to continue its ongoing discussions with the holders of its 3 percent convertible notes. Suntech said it would meet creditors of its main manufacturing unit in China, Wuxi Suntech, on May 22.

Banks including Bank of America Corp., Barclays Plc and JPMorgan Chase & Co. won dismissal of antitrust lawsuits by plaintiffs claiming that they were harmed by the rigging of the London interbank offered rate (Libor), Bloomberg News reported yesterday. In more than two dozen interrelated cases before U.S. District Judge Naomi Reice Buchwald in New York, the banks were alleged to have conspired to depress Libor by understating their borrowing costs, thereby lowering their interest expenses on products tied to the rates. While potential damages were estimated to be in the billions of dollars, the judge ruled that the cases must be dismissed because of the inability of litigants that included brokerage Charles Schwab Corp., pension funds and other bondholders to show they were harmed. Buchwald, whose March 29 ruling allowed some commodities-manipulations claims to proceed to a trial, said that, while private plaintiffs must show actual harm, her ruling did not impede governments from pursuing antitrust claims tied to attempts to manipulate Libor.

Rep. Jeb Hensarling (R-Texas), the new chairman of the House Financial Services Committee, wants to limit taxpayers' exposure to losses in banking, insurance and mortgage lending by unwinding government control of institutions and programs the private sector depends on, from mortgage giants Fannie Mae and Freddie Mac to flood insurance, the Wall Street Journal reported today. Banks and other large financial institutions are particularly concerned because Hensarling plans to push legislation that could require them to hold significantly more capital and establish new barriers between their federally insured deposits and other activities, including trading and investment banking. "A great case can be made that we need greater capital and liquidity standards," Hensarling said. "Certainly, we have to do a better job ring-fencing, fire-walling—whatever metaphor you want to use—between an insured depository institution and a noninsured investment bank." Industry representatives expressed some level of anxiety about Hensarling's legislative agenda, but because the chairman has not offered details yet, they were reluctant to speak publicly about his plans.

Large global banks' legal tab is poised to soar beyond $100 billion as investors, insurers and municipalities pursue damages for actions tied to the mortgage meltdown, the financial crisis and the rate-rigging scandal, the Wall Street Journal reported today. This month, Citigroup Inc. agreed to pay $730 million to settle claims that it misled investors in four dozen bond and preferred-stock offerings. Deutsche Bank AG cut its 2012 profit target by 60 percent, citing higher U.S. mortgage-litigation reserves. Government-controlled mortgage investor Freddie Mac sued more than a dozen big banks, claiming that they colluded to manipulate the London interbank offered rate. The largest U.S. banks—Citigroup, J.P. Morgan Chase & Co., Bank of America Corp. and Wells Fargo & Co.—together have paid $61.3 billion to settle credit-crisis and mortgage claims over the past three years, according to SNL Financial. Research firm Compass Point Research & Trading LLC estimates that U.S. banks will wind up owing a further $24.7 billion related to the repurchase of faulty mortgage loans.

While many of the lawyers may be ready to toast an upswing in deals, one prominent mergers' banker thinks it is too early to expect a boom, the New York Times reported yesterday. Mark Shafir, co-head of global mergers and acquisitions at Citigroup, said that professionals in the business of mergers and acquisitions are still trying to find their footing after the financial crisis. Many of the factors that should lead to an enormous recovery in deals are in place, he said, but there are enough potential problems that the market is lagging behind where it should be. Western Europe continues to be an extreme laggard, leaving a hole in the market that has yet to be filled. By one measure, the deal environment has not markedly improved from last year, according to Shafir. The number of deals this year whose value surpassed $1 billion disclosed is 95, just one more than in the period a year earlier. That is even after the announced sales of Dell, H.J. Heinz and Virgin Media.

Freddie Mac sued Bank of America Corp., UBS AG, JPMorgan Chase & Co. and a dozen other banks over alleged manipulation of the London interbank offered rate, saying that the mortgage financier suffered substantial losses as a result of the companies’ conduct, Bloomberg News reported today. Government-owned Freddie Mac accuses the banks of acting collectively to hold down the U.S. dollar Libor to "hide their institutions' financial problems and boost their profits," according to a complaint filed in federal court. "Defendants' fraudulent and collusive conduct caused USD LIBOR to be published at rates that were false, dishonest, and artificially low," Richard Leveridge, a lawyer for Freddie Mac, said in the complaint, which was made public yesterday. Manipulation of interest rates by some of the world’s biggest banks has spawned probes by half a dozen agencies on three continents in what has become the industry’s largest and longest-running scandal. More than $300 trillion of loans, mortgages, financial products and contracts are linked to Libor.

Bankruptcy Judge James Peck yesterday gave creditors of Lehman Brothers approval to subpoena former JPMorgan Chase & Co trader Bruno Iksil, the so-called "London Whale," in an $8.6 billion lawsuit against the bank, Reuters reported yesterday. Judge Peck rejected arguments from JPMorgan that Iksil had little to do with the allegations in the lawsuit, which centers on JPMorgan's role as Lehman's main clearing bank in the days leading up to its Sept. 15, 2008, bankruptcy. Lehman and its unsecured creditors' committee accuse JPMorgan of using its access to Lehman to extract $8.6 billion of collateral in the four business days ahead of the chapter 11 filing.

HSH Nordbank AG, the German regional lender, settled a lawsuit it filed against UBS AG over losses on a collateralized debt obligation linked to the U.S. subprime-mortgage market, Bloomberg News reported yesterday. HSH Nordbank, based in Hamburg, sued UBS in February 2008 over losses on a CDO called North Street 2002-4. HSH Nordbank said in the suit that its predecessor, Landesbank Schleswig- Holstein, lost almost all of the $500 million it invested in the CDO in March 2002. HSH Nordbank is one of a group of regional German lenders that have sued in New York courts over mortgage-backed securities. It sued Bank of America Corp. in New York State Supreme Court in December over $218 million in such investments, and has filed suits against Barclays Plc, Goldman Sachs Group Inc. and Morgan Stanley in the same court.

The six largest U.S. banks may return almost $41 billion to investors in the next 12 months, the most since 2007, as regulators conclude firms have amassed enough capital to withstand another economic shock, Bloomberg News reported yesterday. Lenders, including Citigroup Inc. and Bank of America Corp., will buy back $26.4 billion in shares, up from $23.8 billion, according to the average estimate of three Wall Street analysts. An additional $14.5 billion will be paid out in dividends, $3.4 billion more than 2012, separate estimates show. The payouts are contingent on approval by the Federal Reserve.