Saturday, 23 August 2014
Last updated 22 hours ago
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.
Aug 4 2014 | 7:42am ET
By now, U.S. and international subscribers have received their home or office delivery of the special 500th issue of Futures magazine. You can too!—a very special offer follows. The issue is the largest in years—filled with the best trading strategies and stories from 43 years of being the primary publication for commodity, stock, options and forex traders. Read more…
The July/August 2014 issue is our largest in years—filled with the best trading strategies and stories from 43 years of being the primary publication for commodity, stock, options and forex traders.
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