Two mortgage related hedge funds file for bankruptcy
-->Uncategorized August 1st, 2007
AP reports that
Two Bear Stearns Cos. hedge funds heavily exposed to the flagging mortgage industry filed for bankruptcy protection late Tuesday, two weeks after the company told investors one was essentially worthless and the other had lost more than 90 percent of its value.
The Bear Stearns High-Grade Structured Credit Strategies Master Fund Ltd. and the Bear Stearns High-Grad Structured Credit Strategies Enhanced Leverage Master Fund Ltd. — which invested in securities backed by risky mortgages — filed for protection under Chapter 15 of the bankruptcy code, according to court documents.
Chapter 15 covers cross-border petitions and was used because the funds are technically registered in the Cayman Islands.
The funds were squeezed after Bear Stearns made wrong-way bets on the home mortgage market and was caught as loans to risky investors began to default. In July, the company said the assets in the Enhanced fund were essentially worthless, while the other was worth 9 percent of its value at the end of April.
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