GoldenTree Asset Management has been the de facto owner of Port Townsend Paper Corp. since the pulp, containerboard and kraft mill emerged from bankruptcy proceedings in August 2007.

As the largest bondholder of the pulp, paper and container-board mill and its western Canada finishing plants after the mill went into bankruptcy, GoldenTree emerged as the leading partner of the new ownership group that took over from Northwest Capital Appreciation.

In subsequent years, GoldenTree has consolidated its ownership stake in PT Paper.

Ted S. Lodge, a GoldenTree partner and listed as GoldenTree’s special situations expert on the company’s website, is chairman of the board for PT Paper and, according to sources, calls the shots for the plant and its Canadian finishing facilities.

Lodge “is responsible for restructurings and turnarounds” for GoldenTree, according to that company’s website. He lives in New York and oversees several companies owned by GoldenTree, including having board roles with James Cable, Source Interlink, Neenah Foundry, R.J. O’Brien, KCA Deutag, Haights Cross and Southern Community Newspapers, according to GoldenTree’s website. An attorney, he also earned a master of science degree from the London School of Economics, and studied economic theory at Harvard.

Before joining GoldenTree, he “served as an advisor to private equity firms and hedge funds investing in stressed and distressed businesses and led the turnarounds or restructurings of a number of companies,” noted the website.

Fast growing

GoldenTree has been rapidly growing among the asset management and hedge funds based in New York, although it is not the largest.

It was founded on March 1, 2000 by four hedge fund experts led by Steven Tananbaum, who now is GoldenTree’s CEO and chief investment officer. Tananbaum was an analyst at New York investment management firm MacKay Shields in 1989, and two years later, at the age of 24, was promoted to run the firm’s high-risk, high-yield portfolio. In 1997, according to a 2005 article in Pensions and Investments, he started MacKay’s hedge fund group.

Wanting more freedom to act, in 2000, according to Wall Street reports, he gathered three other hedge fund experts, including Leon Wagner of CIBC World Markets, to start GoldenTree with $70 million in investments.

Today, GoldenTree has assets under management of $16.1 billion. About 60 percent of that portfolio is hedge funds. It has 180 employees, including 22 partners who own the firm. It has offices around the world, according to its website.

The firm owns dozens of companies across the U.S. and overseas, primarily in Europe and Latin America. Like other asset management firms, GoldenTree specializes in making high-interest, collateralized loans to troubled companies – high risk, high yield. When a company goes bankrupt – as PT Paper did in 2007 – GoldenTree may assume an ownership position and bring in new managers and practices to try to turn a company around and sell it at a profit.

Success with most companies covers the cost of failure with others.

Notes GoldenTree’s website about its business philosophy: “Our value philosophy identifies companies where the market value of the balance sheet does not accurately reflect the enterprise value of the underlying businesses. We believe that double-digit returns can be compounded over market cycles by investing in companies with sound business models and management committed to de-leveraging.”

According to a March 1, 2012 profile of GoldenTree in the investor newsletter Absolute Return, GoldenTree has generally paid off its investors. One of its funds has an annualized return of more than 10 percent since inception, according to Absolute Return.

However in 2008 – the first full year of GoldenTree’s control of PT Paper, and the first full year of the national recession – the equity firm’s flagship fund lost 38.6 percent of value. It rebounded in 2009, gaining 70 percent, and another 23.6 percent in 2010. It was flat in 2011.

Milken connection

Some GoldenTree leaders were associates of Michael Milken, the Wall Street investment wizard credited with inventing the high-risk, high-yield financial tools responsible for fueling the rapid economic growth in the late 1970s and 1980s. Milken led the investment firm Drexel Burnham Lambert and became known in the media as the “junk bond king” as he and his firm amassed wealth through high-yield bonds. He was indicted in 1989 for violating securities laws by then U.S. Attorney Rudolph Guiliani. While Milken was indicted on 98 counts, he entered a guilty plea to only six lesser charges and was sentenced to 10 years in jail, later reduced to two years. He also paid $200 million in fines related to the convictions. He and his supporters have always maintained that prosecutors, determined to find a fall guy for economic troubles, trumped up the charges, and that the penalties were too harsh.

Today, Milken focuses his energy on the Milken Institute, a think tank, and hosts an annual forum for hundreds of executives on credit and global financial trends. For the past several such forums, Tananbaum has been one of the headline guest speakers, as he was on May 1, 2012.

Milken’s net worth today is estimated at more than $2.5 billion.

Wagner, GoldenTree’s cofounder and first chairman, headed the sales effort for Milken’s junk bond group at Drexel Burnham Lambert, according to a 2005 interview in Pensions and Investments. He also ran CIBC World Markets’ high-yield trading business before cofounding GoldenTree. He was, said the Absolute Return profile, “extremely visible among GoldenTree’s investors.” He retired in late 2010.

Wagner brought a former Lehman Brothers associate, Robert Matza, into GoldenTree in January 2006 as president. He remains in that post today.