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Alternative Market Briefing

Updated: Aequitas Capital collapses on faulty subprime bets

Tuesday, February 23, 2016

Bailey McCann, Opalesque New York:

Oregon-based Aequitas Capital made a name for itself on credit investing, but has collapsed on the news of bad student loan debt and investigations by both the SEC and the Consumer Financial Protection Bureau. As recently as November, the company was adding new people to its advisory board and leading rounds of investments with over a billion in AUM- and then the ground shifted.

The company filed a WARN notice, and told all employees that their jobs could be in jeopardy. The first round of layoffs included 30 staffers at the end of January. It is unclear how soon the remaining staff will be terminated. According to the Portland Business Journal, a "skeleton crew" is expected to lead the company after March 29 when the layoffs take effect. Approximately 100 people are likely to lose their jobs, prompting the state of Oregon to hold a workshop to help workers understand their options.

It appears that Aequitas' subprime strategy went awry following a $600 million bet on student loans with fraudulent for-profit school Corinthian Colleges. Corinthian collapsed after federal investigators began looking at predatory loans offered by the for-profit school. Students at Corinthian amassed significant debt on the hopes of getting vocational training and career placement help which rarely materialized. Aequita......................

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