Bad News Bear Gets Reprieve, Blackstone Gets Involved

Jun 19 2007 | 12:17pm ET

It’s shaping up to be a busy day at Bear Stearn’s Madison Avenue headquarters, as the bank struggles to keep a sinking hedge fund afloat.

The news has been all bad for Bear’s High-Grade Structured Credit Strategies Enhanced Leverage Fund: the year-old fund is down more than 20% this year, facing hundreds of millions in redemption requests, as well as margin calls from it’s lenders—the $600 million fund is 10-times levered—and an asset seizure. Over the last several weeks, the fund has sold off some $4 billion in mortgage-backed bonds to meet these demands.

But, yesterday, a tiny bit of good news: Bear won a one-day reprieve from its creditors—including an agreement by Merrill Lynch, which seized $400 million in assets on Friday, to postpone the auction of those assets by 24 hours—as it scrambles to put together a bailout plan acceptable to all. The Wall Street Journal reports that Bear presented a draft plan to save the fund, including $1.5 billion in new loans from Bear itself. That represents a dramatic increase in the bank’s exposure to the flailing fund, which is currently just $40 million.

In addition, according to the Journal, other banks are willing to invest some $500 in new equity capital, allowing some lenders to cut their exposure by 15%. Half of that money would come from Barclays, and the other half from a Citigroup-led creditors’ consortium.

Bear will meet again with creditors today to hash out the rescue plan. Some are balking at Bear’s insistence on a 12-month freeze on collateral calls. In addition, The Blackstone Group is getting in on the action. Reuters reports that the private equity firm will present a rescue plan on Tuesday as well. The firm declined to comment on its rescue efforts.


In Depth

Kettera Q&A: The Advantages of Alternative Investment Platforms

Oct 28 2016 | 5:52pm ET

The past several years have seen a distinct push towards easier and cheaper access...

Lifestyle

Midtown's Plaza District Fades As Manhattan Office Landscape Shifts

Nov 22 2016 | 6:32pm ET

Lower leasing costs, more efficient office space and the hope of projecting an image...

Guest Contributor

Nowhere to Hide: Why the Future of Asset Management Depends on Innovation

Nov 15 2016 | 6:55pm ET

Information technology has reshaped the asset management industry’s periphery,...

 

From the current issue of

Chicago-based independent futures brokerage and clearing firm R.J. O’Brien & Associates (RJO) has hired industry veteran Daniel Staniford as Executive Director, responsible for the firm’s institutional business development in New York and London.

AVAILABLE NOW at BARNES & NOBLE

NEWSTAND LOCATOR