Merrill Lynch seizes assets worth $400m from Bear Stearns

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ASusilovic

From the WSJ: Concerned that an internal hedge fund at Bear Stearns Cos. wouldn't be able to meet a margin call, Merrill Lynch & Co., one of the fund's biggest lenders, seized $400 million of its assets and is preparing to auction them off. The auction, in the coming week, could trigger the fund's dissolution -- the second blowup in recent months of a hedge fund that made dicey bets on the market for risky home loans, known as subprime mortgages.

The surprise move involving the two Wall Street firms came as the Bear fund's managers, led by bond-sales veteran Ralph Cioffi, scrambled Thursday and Friday to sell hundreds of millions of dollars in bonds to satisfy demands for cash and assets from creditors and stave off liquidation. Mr. Cioffi's group had successfully auctioned off almost $4 billion in high-quality mortgage bonds Thursday morning. Later that afternoon at Bear's New York offices, the fund managers presented lenders with a 30-day plan for selling more assets, a blueprint for meeting new margin calls that appeared to have been well-received. Merrill opted not to wait...
http://online.wsj.com/article/SB118...l?KEYWORDS=hedge+fund&COLLECTION=wsjie/6month
 
NEW YORK, June 18 (Reuters) - Merrill Lynch & Co. Inc.
<MER.N> plans to delay selling off some $400 million of assets
seized from a hedge fund managed by Bear Stearns, CNBC said on
Monday.
Merrill is delaying selling the assets until it hears the
troubled hedge fund's plan to recapitalize, the network
reported. Merrill and Bear are expected to discuss the plan on
Monday or Tuesday, CNBC said.
The Wall Street Journal reported on Saturday that Merrill,
which is one of the fund's biggest lenders, had seized $400
million of assets from the Bear Stearns High-Grade Structured
Credit Strategies Enhanced Leverage Fund. That fund was down 23
percent through April after suffering losses in investments in
subprime mortgages, or home loans made to people with weak
credit, the newspaper said.
Representatives from Bear Stearns and Merrill Lynch were
not immediately available for comment.
 
Bear Stearns Cos., the biggest broker for U.S. hedge funds, offered to provide $1.5 billion in loans to help rescue a money-losing fund run by its asset- management unit, a person familiar with the situation said.

The plan calls for New York-based Bear Stearns to provide the money only if some of the hedge fund's creditors, which include Merrill Lynch & Co. and JPMorgan Chase & Co., inject $500 million of cash into the fund, said the person, who declined to be named because the negotiations aren't public.

more : http://www.bloomberg.com/apps/news?pid=20601087&sid=a8h9MrRRxio8&refer=home
 
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