Amaranth Plans to Stay in Business

The Amaranth offices are shown in Greenwich Conn. Friday Sept. 22, 2006. Amaranth Advisors, the Connecticut hedge fund that lost almost $6 billion over the past month after finding itself on the wrong side of a bet on natural gas prices, holds a conference call with its investors. (AP Photo/Douglas Healey ) (Douglas Healey - AP)

The past week had been a painful one, Maounis said on the call, which was monitored by Dow Jones Newswires. He added that the fund's managers had also lost a lot of their own money.

"We feel bad about losing our own money, we feel much worse about losing your money," he said.

While Maounis didn't name the buyer of the energy portfolio, people familiar with the deal have said it was bought by JPMorgan Chase & Co. and Chicago-based hedge fund Citadel Investments.

Maounis said sale of the energy portfolio likely prevented investors from losing all their funds and that only one bid for the portfolio was received.

Amaranth's energy and commodities portfolio was responsible for a big chunk of the fund's previous success, booking a $1.26 billion profit in 2005 and $2.17 billion for this year to the end of August.

But the losses came swiftly to the portfolio. It began incurring large losses in natural gas in the week starting Sept. 11, and on Sept. 14, Amaranth lost roughly $560 million on its natural gas position as prices for the commodity plummeted to a two-year low.

"We continued to attempt to reduce our natural gas exposures while also selling other positions to raise cash in order to meet margin calls," Maounis said. But "as news of our losses began to sweep through the market our already limited access to market liquidity quickly dissipated."

Faced with big margin calls on natural gas positions and unable to borrow more to finance them, Amaranth sold its positions, Maounis said.

Had it not done so, creditors may have liquidated the fund's holdings in a move that "we believed would have resulted in substantial, if not total, losses to investors," he said.

The hedge fund had postponed three other calls it had scheduled this week with pension fund managers from San Diego County since it first disclosed its losses Monday.