Bear Plan Hits Hurdle

Jun 20 2007 | 10:29am ET

Bear Stearns suffered a major setback in its effort to save one of its hedge funds, but the fear of its failure to do so may push the bailout through.

Merrill Lynch, one of the three lenders to the Bear Stearns High Grade Structured Credit Strategies Enhanced Leverage Fund that helped precipitate the crisis with margin calls, indicated it was going ahead with a plan to auction $850 million in assets it seized from the hedge fund last week after a 24-hour delay, The New York Times reports.

Negotiations are reportedly ongoing, but Bear’s insistence on a 12-month freeze on collateral calls continues to garner opposition. But the alternative, a widespread sell-off of the hedge fund’s assets leading to the fund’s dissolution, could roil the markets and undervalue the fund’s securities, an unpalatable scenario for many of the lenders.

 


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