Canyon’s Friedman Laments GSO’s ‘Unseemly’ Hovnanian Swaps Deal

Canyon Partners head Josh Friedman said GSO Capital Partners went “beyond the bounds” of how deals should be done when it required a homebuilder to default on debt in order to gain new financing. The default could allow GSO to collect on side-bets that it had used to wager against Hovnanian’s debt, a series of a arrangements that were “a little unseemly," Friedman, Canyon’s chief executive officer, said during a Bloomberg TV interview with Erik Schatzker at the Milken Institute Global Conference. The side-trades were done using credit default swaps, a derivatives market that was designed in part to compensate investors if a company ended up unable to pay its obligations.