A pair of hedge funds run by Petra Capital Management have filed for bankruptcy, citing liabilities of as much as $500 million with assets of as little as $1 million.
Petra's Offshore Fund and Fund REIT Corp. sought Chapter 11 bankruptcy protection in Manhattan yesterday. The firm, founded by commercial mortgage-backed securities market pioneer Andrew Stone, said the filing was part of a restructuring agreement is has reached with a secured creditor.
The five-year-old firm said the funds' troubles were linked, unsurprisingly, to the crash of the real-estate market. The REIT fund was also backed by troubled insurance firm American International Group and follows a judgment against the funds won by one of its creditors, KBS Preferred Holding I.
Stone was a former star mortgage-backed trader at Salomon Brothers before moving on to build CMBS desks at Daiwa Securities and Credit Suisse First Boston. He was reportedly pushed out of the latter due to the aggressive loans he wrote.
It is unclear how the bankruptcy filing will affect Petra's other investments. The hedge fund is said to manage about $3.7 billion.