Thursday, 25 December 2014
Last updated 1 day 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.
Dec 1 2014 | 10:21am ET
As 2014 winds down, Northern Trust Hedge Fund Services executives took some time to share their outlook on trends facing the industry in 2015. Read more…
Jeff Sprecher was simply looking for a platform to trade energies when launching ICE 14 years ago but it has grown to reach the pinnacle of both the listed futures and equities world.