Cayman Net News- The failure of two Cayman Islands-based hedge funds, which is estimated at US$4 billion in losses, could have severe repercussions on the offshore banking industry in the Cayman Islands, according to experts in the sector.<\/p>\n
US financial giant Bear Stearns was forced to liquidate the two funds, Bear Stearns High-Grade Structured Credit Strategies Master Fund Ltd and Bear Stearns High-Grade Structured Credit Strategies Enhanced Leverage Master Fund Ltd, after their target loan market collapsed.<\/p>\n
There have also been comments about the speed of the collapse with one hedge fund folding in less than ten months after being created.<\/p>\n
On 22 June, Bear Stearns pledged a collateralised loan of up to US$3.2 billion to bail out the Bear Stearns High-Grade Structured Credit Fund, while negotiating with other banks to loan money against collateral to the Bear Stearns High-Grade Structured Credit Enhanced Leveraged Fund.<\/p>\n
About three weeks later Bear Stearns disclosed that theses two hedge funds had lost nearly all of their value amid a rapid decline in the market for sub-prime mortgages, made to people with low credit ratings.<\/p>\n
On 31 July, both funds filed for bankruptcy protection with the Grand Court in the Cayman Islands. Bear Stearns also used a recent amendment to US bankruptcy code to block all lawsuits against the funds and protect the company\u00c3\u00a2\u00e2\u201a\u00ac\u00e2\u201e\u00a2s assets in the USA from litigation arising from the collapse of the hedge funds.<\/p>\n