CNBC- A federal judge on Monday barred investors from seizing the assets of two Bear Stearns Cos. hedge funds for 10 days, but indicated he is considering lifting the funds’ U.S. bankruptcyprotections.
Judge Burton Lifland of the U.S. Bankruptcy Court in Manhattan said he hadn’t reached a decision on the funds’ request for U.S. Chapter 15 protection, which would allow the funds to seek bankruptcy-law protection in the United States while liquidating in the Cayman Islands.
The two funds bet heavily on subprime mortgage loans and as defaults increased, creditors began to clamor for their collateral, leaving the funds short on cash.
Provisional liquidators working to unwind the funds in the Caymans estimate that the High-Grade Structured Credit Strategies Master Fund could see recoveries of $25 million, and the smaller High-Grade Structured Credit Strategies Enhanced Leverage Master Fund could see recoveries of less than $50 million.
Bear Stearns stepped in and bought out investors’ positions after big Wall Street firms started fleeing the larger fund earlier this year.
Lifland said it appears the two funds, though registered in the Caymans, operated primarily out of New York.
