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  "documentTitle": "Fairfax Financial Holdings Ltd. (FFH)",
  "authorId": "51_Muddy_Waters",
  "authorName": "Muddy Waters Research",
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  "presentationDate": "2024-02-08 00:00:00",
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  "notes": "The slide uses a narrative structure to frame the RiverStone JV as a mechanism for financial engineering rather than a legitimate business operation.",
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      "text": "The financial engineering of the RiverStone JV enabled Fairfax to book net $117.1 million paper gains, without which Fairfax would have reported a loss in 2020.",
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      "text": "net paper gains: $117.1 million",
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      "text": "Producing the paper profits and averting losses required Fairfax to incur off-balance sheet debt. First, OMERS purchased 40% of RiverStone common shares. As in earlier transactions, we suspect that OMERS only made this investment because it expected Fairfax to ensure its preferred would be sold for at least breakeven – whether back to Fairfax or another buyer.",
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      "text": "That other buyer, a private equity fund managed by CVC Capital Partners, took OMERS out of its investment at a slight premium. However, Fairfax had to provide a three-year (later extended to four-year) guarantee on the associates through a convoluted security called an \"AVLN\" (\"Asset Value Loan Note\"). The AVLN was effectively a repo agreement that gave the European runoff business away for free.",
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      "text": "In December 2019, Fairfax appeared to be girding for a difficult year. It signed an agreement with OMERS to form a joint venture called \"RiverStone\" to hold Fairfax's European runoff business. Soon thereafter, Covid-19 hit. 2020 would turn out to be awful for Fairfax. The financial engineering of the RiverStone JV enabled Fairfax to book net $117.1 million paper gains,1 without which Fairfax would have reported a loss in 2020. RiverStone also served as a receptacle for seven associates or subsidiaries that would have caused Fairfax to book losses in 2020 likely in the multiple hundreds of millions of dollars.",
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      "text": "1 Fairfax Financial Holdings Annual Report 2020, Pg. 100.",
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      "kind": "title",
      "text": "RiverStone — Overview",
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