Australia’s Basis Loses U.S. Bankruptcy Bid

Jan 16 2008 | 6:39am ET

For the second time, a U.S. court has rejected a collapsed hedge fund’s bid for bankruptcy protection during its offshore liquidation.

Australia’s Basis Capital Fund Management lost its bid for Chapter 15 bankruptcy protection, which would have allowed it to pursue a liquidation of its Yield Alpha Fund in the Cayman Islands, where the fund is registered. But, deferring to an early decision on the liquidation of two collapsed Bear Stearns hedge funds, U.S. Bankruptcy Judge Robert Gerber said, “the court’s power to ascertain the facts can’t be side-stepped by failures to object.”

Basis had argued that it is entitled to the presumption that it has substantial operations where it is registered, a requirement for Chapter 15 protection.

Bear is currently appealing the decision against it, in which U.S. Bankruptcy Judge Burton Lifland ruled that courts can’t “rubberstamp” protection of foreign firms from their debtors.

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