....The $1.6 billion bailout package Bear put up is almost certain to be paid back. The lenders who backed the funds initially have been paid back, too. The investors - Bear's clients - on the other hand, will get a "thank you" and "come again soon."....
The only question that remains is how much of the $1.6 billion bailout package will Bear get back? DJO believes they will get it all back.
...
....The $1.6 billion bailout package Bear put up is almost certain to be paid back. The lenders who backed the funds initially have been paid back, too. The investors - Bear's clients - on the other hand, will get a "thank you" and "come again soon."....
The only question that remains is how much of the $1.6 billion bailout package will Bear get back? DJO believes they will get it all back.
...
TJ -
That's not exactly my concern. My issue was more clarity at the next level - when I'm seeing news quotes like this one (from the FT no less on Aug 7) that don't appear accurate. Bear may have lost $1.6B or $3B but that's a whole lot different than what that statement "near total losses on subprime bets worth more than $20bn" implies. That says to me that lost almost $20bn and I don't believe that is the case.
Some (not you) have tried to put a whole lot of words in my mouth on this issue. I was only interested in getting an accurate portrayal of the impact of a fairly narrow topic and that effort was pretty grossly misconstrued.
I too have noticed that the MSM has repeatedly reported that Bear lost around $20 billion with those hedge funds. I now interpret that to mean that those two hedge funds lost $20 billion in "market value" before they were shut down. Not that Bear Stearns was out $20 billion.
It makes for a more dramatic headline / news story to say that Bear lost $20 billion rather than the $1.6 billion they actually put up for the bailout.
A federal judge refused to grant permanent protection from U.S. lawsuits for Bear Stearns Cos.' two bankrupt hedge funds, questioning whether the Cayman Islands should be the principal site of their liquidation.
U.S. Bankruptcy Judge Burton Lifland in New York today said he ``will issue a decision in the next week to 10 days'' on whether Bear Stearns picked the proper jurisdiction for the funds, whose assets are mostly located in New York. He banned any suits against the funds while he deliberates........
..
BSC puts have been the gift that keeps on giving. They have been my ATM for the past 3 months. They may bounce here and there, but if you are disciplined enough (and I'm not saying that I am), they should be a reliable source of fast money.
Troubled offshore funds may have to become more creative in looking to protect their U.S. assets from creditors, if a controversial new bankruptcy court decision is upheld. A U.S. bankruptcy court in New York has declined to recognize the Cayman Islands liquidation proceedings filed by two Bear Stearns hedge funds whose Cayman liquidators had sought to protect against seizure of U.S. assets by filing petitions for protection under Chapter 15 of the Bankruptcy Code. Chapter 15 is a comparatively new addition to U.S. law, and the meaning and effect of that law are still being tested. .........
..
............In a controversial Opinion issued on August 30, 2007 by Bankruptcy Judge Burton R. Lifland, the court declined to recognize the funds' Cayman liquidation proceedings, whether as "foreign main" or "foreign non-main." Instead, Judge Lifland invited the funds' foreign representatives to commence an involuntary Chapter 11 proceeding, if protection for U.S. assets was desired. Judge Lifland held that a Cayman exempted company could not, under Cayman Law, have the requisite "center of main interest," or COMI, in the Caymans, as exempted companies must inherently transact business abroad. As for the Bear Stearns funds, Judge Lifland opined that the funds' COMI was likely in New York, despite registration in the Cayman Islands, as the funds' day-to-day operations and assets were New York-based. Without a COMI in the Cayman Islands, Judge Lifland declined to deem the Cayman liquidation proceedings as the funds' main proceeding.......
British billionaire Joseph Lewis, a magnate who controls more than 170 companies, has acquired a 7 percent stake in investment bank Bear Stearns Cos., becoming one of its largest shareholders.
Lewis, who runs Florida-based investment vehicle Tavistock Group, bought 8.1 million shares between Aug. 6 and Sep. 7, according to documents filed Monday with the Securities and Exchange Commission. That would make him the investment bank's largest shareholder, assuming no others holders have adjusted their stakes substantially of late......
..
It used to be basically impossible to keep up with the terms of newly-issued mortgage deals, but you could at least stay up to date with downgrades. Now that the situation is completely reversed, I thought it might be interesting to look at the terms of one of the very few new issues out there.....
..
Bear Stearns emerges as Wall Street's biggest loser from turmoil
Andrew Clark in New York
Friday September 21, 2007
The Guardian
The investment bank Bear Stearns has suffered a painfully sore head from America's sub-prime mortgage crisis, revealing a 62% collapse in quarterly profits which made it by far Wall Street's biggest loser from the credit crunch.
Bear Stearns' earnings for the three months to August dropped from $438m to $171m. Its slump was in stark contrast to the fortunes of larger rival Goldman Sachs which found opportunities to exploit in the summer's volatility and achieved a 79% leap in profits.
The divergent performances of the two banks emerged as the Federal Reserve chairman, Ben Bernanke, offered reassurances on America's stability, telling a Congressional committee that the economy remained in a "relatively strong position". Mr Bernanke conceded, however, that global financial losses had "far exceeded even the most pessimistic estimates" about the danger of sub-prime mortgages.
Among the victims of the credit crunch were two Bear Stearns hedge funds, worth a combined $1.5bn a year ago, which collapsed leaving the bank with costs and liabilities of $200m. In a conference call, Bear Stearns chief financial officer Sam Molinaro said "extraordinary market conditions" had battered earnings.
edit:
Looks like this is right. Just confirmed with by reading the text of the analyst call over at Seeking Alpha
Included in the quarterly results are approximately $200 million of losses associated with the failure of the high grade funds, representing the write-off of our investment and fees receivable, losses from the liquidation of the $1.6 billion repo facility provided to the high grade fund, and other directly related expenses.
A group of London investors is expected to join shortly an arbitration claim filed in the U.S. against Bear Stearns & Co. for allegedly misrepresenting the risk and return of two failed hedge funds. Legal action was initiated on Aug. 1 by New York securities law firms Zamansky & Associates and Rich & Intelisano on behalf of an undisclosed investor.......
..........In the original complaint, filed with an NASD arbitration tribunal, the U.S. investor charges that the Bear funds never provided transparent disclosure about the full extent of their sub-prime exposure due to investments in pooled collateralized debt obligations and asset-backed securities. "In fact," says the filing, "investors were not given full disclosure until well after it was too late for them to redeem their investments, and the fund was worthless."
Zamansky also alleges that Bear Stearns misstated the funds' returns. "We believe that Bear Stearns misrepresented the risk to investors of these funds," he said. "Bear represented that they had risk controls in place to mitigate losses. On conference calls, they [also] misrepresented the performance of the funds to prevent a run on the bank." If true, such actions would constitute securities fraud under the Securities Exchange Act of 1934.
A spokesperson for Bear Stearns said that "the allegations are unjustified and without merit. The accredited, high-net-worth investors in the fund were made very aware that this was a high-risk, speculative investment vehicle.".......
..
It is interesting that Bear got most (all?) of the media coverage, but Merrill, UBS etc. took a bigger hit. I guess that says something about the objectivity of the media or maybe Bear just didn't hide the problem as well.
I think I read somewhere that two top Merrill execs got canned because of the subprime problem.
How do you feel about the corporate-owned US Federal Reserve bailing out another privately-owned corporation? In addition, the Fed is doing this with US dollars, in the form of hidden inflation on US citizens. Doesn't this strike anyone as a bit odd?
Not really odd. Typical is more how I would describe it. The USA is at cultural stage now where there are haves and nots. The haves will use everything they've got to keep the gap until something drastic happens.
I started by asking the Calcutta-born Australian whether the credit crisis was in what Americans would call the "third inning." This was pretty amusing, it seemed, judging from the laughter. So I tried again. "Second inning?" More laughter. "First?"
Still too optimistic. Das, who knows as much about global money flows as anyone in the world, stopped chuckling long enough to suggest that we're actually still in the middle of the national anthem before a game destined to go into extra innings. And it won't end well for the global economy.
And guess what, Markman is not usually a very bearish writer. Most of his posts are about specific stocks he recommends and the like. When I first saw this listed on MSN, I assumed it was from Fleckstein or the like.
One rule of thumb is when the moderates start clamoring, it's time to listen. This is true in economics, politics, and global warming.
There just seems to be a little more clamoring than usual lately.
NEW YORK - Investment bank Bear Stearns Cos. and Chinese bank Citic Securities Co. said Monday they will form a strategic partnership that includes $1 billion in cross-investments and the creation of a new Asian joint venture.
Citic, which is owned by the investment arm of the Chinese government, will invest in Bear Stearns through 40-year convertible trust preferred securities that will convert to about 6 percent of Bear Stearns' outstanding shares. Citic could potentially increase the stake to 9.9 percent.
Bear Stearns will acquire a similar stake in Citic through a six-year convertible debt security. Bear Stearns will also have options to acquire additional shares.
The announcement of the deal was fairly swift, as Vice Chairman Jiang Dingzhi of the China Banking Regulatory Commission said last Tuesday at a Communist Party meeting that Citic was interested in investing in Bear Stearns.
Aside from the cross-investment, the pair will form a new joint venture based in Hong Kong that will offer capital markets services across all of Asia. Bear Stearns will contribute its current Asian operations in Hong Kong, Tokyo and Singapore to the new joint venture. Citic will contribute its operations in Hong Kong and pay Bear Stearns a financial consideration for the new 50-50 joint venture.
The new venture will offer a range of products, including cross-border mergers and acquisitions advisory, international equity and fixed income offerings and venture capital, private equity and asset management services.
Each company is expected to have representation on the other's board of directors.
Bear Stearns is coming off a rocky summer in which two hedge funds it managed went bankrupt, losing billions of dollars on bad bets in the subprime mortgage industry.
Bear Stearns' earnings were among those hardest hit by rising delinquencies and defaults among subprime mortgages _ loans given to customers with poor credit history _ and the declining value of securities backed by the risky loans.
In recent months, as Bear Stearns tried to rebound from the credit crunch, there was heavy speculation the company would seek an outside investment, particularly one from Asia.
Bear Stearns has lagged behind its competitors in size and scope of operations, especially in Asian markets, making Citic a fit to diversify and grow its business.
Shares of Bear Stearns rose $1.09 in premarket trading to $117.50.
Investors in two highly leveraged Bear Stearns Cos. hedge funds that went belly up in the summer are taking an unusual tack in an effort to probe possible wrongdoing in the fund's operations, said a person involved with the effort.
Investors who lost about $650 million in the Bear Stearns High-Grade Enhanced Leverage fund, known as Hegel, are scheduled to vote at Bear Stearns headquarters in New York on Nov. 7 and in London on Nov. 14 on whether to install a forensic accounting and restructuring firm in place of Bear as controlling party
More than 10% of investors in two so-called feeder funds have petitioned for the change, setting up the vote, the person said. If more than 50% of investors, as measured by capital invested in Hegel, approve, Bear will be replaced as controlling party by FTI Capital Advisors, a broker-dealer subsidiary of FTI Consulting Inc. in Washington, D.C
Lawyers at Reed Smith and some other firms representing institutional investors in the funds have complained that Bear is not cooperating in providing information on the names of all investors or on the activities that led to the funds' demise. FTI would be charged with conducting an investigation to see if there is cause to sue......
......By installing an investigative firm at the center of the funds, which were heavily invested in collateralized debt obligations tied to subprime mortgages, investors hope to pressure Bear Stearns to cooperate, another person said......
......Separately, Massachusetts securities regulators are investigating whether Bear Stearns had a conflict of interest by improperly trading with the two in-house hedge funds, saddling investors with added losses. Bear infused about $1.6 billion into one of the funds in an effort to save it prior to its collapse.
.
Now we know what caused the bad management and failure of those two hedge funds ......
Bear Stearns CEO denies WSJ allegations
. Bear Stearns Cos. Chief Executive James Cayne on Thursday denied regularly smoking marijuana, after a front-page Wall Street Journal article claimed he was frequently away from work playing golf and bridge, and sometimes smoked the drug on such outings......
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Bear Stearns Cos., after posting its biggest earnings decline in more than a decade, reduced subprime holdings by 50 percent in the past two months, limiting writedowns in the fourth quarter to $1.2 billion......
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Investors in London have successfully wrested control of one of the collapsed Bear Stearns hedge funds from its previous management and directors as a first step towards seeking recovery of some of their losses....
Bear Stearns Cos. said Thursday a bigger-than-expected writedown in its mortgage portfolio caused the nation's fifth-largest U.S. investment bank to post the first loss in its 84-year history.
It took a $1.9 billion writedown in the quarter ended Nov. 30 as its mortgage-backed securities continued to lose value amid the global credit crisis. That was much larger than the $1.2 billion it expected in November.
Bear Stearns' fiscal fourth-quarter loss, and collapse of two hedge funds it managed during the summer, prompted Chief Executive Jimmy Cayne to pass on his 2007 bonus. Members of the company's executive committee also will not receive year-end bonuses.....
......The fiscal fourth-quarter loss after paying preferred dividends was $859 million, or $6.90 per share, compared to a profit of $558 million, or $4 per share, a year earlier. The company had negative net revenue of $379 million, compared to revenue of $2.41 billion a year earlier.
The results broadly missed Wall Street expectations, as analysts were unable to get a handle on exactly how exposed Bear Stearns was to risky subprime mortgage securities. Analysts polled by Thomson Financial had expected a loss of $1.79 per share on $625.1 million of revenue for the quarter. No analyst polled by Thomson expected a loss of more than $2.45 per share......
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A novel financing scheme used by Bear Stearns' hedge funds became a template for subprime disaster
When the subprime mortgage market began to unravel late in 2006, global bond markets barely flinched. But when two Bear Stearns (BSC) hedge funds collapsed in June, the event sparked a global credit crisis that has yet to ease. New evidence sheds light on how those hedge funds—and their managers—became star players in the subprime bust, the biggest financial disaster in decades. The revelations also show how other players in the mortgage market adopted the Bear funds' tactics, collectively building a financing structure with many of the hallmarks of a pyramid scheme.......
.
Barclays is suing Bear Stearns for allegedly misleading it over the performance of two collapsed hedge funds that were used as collateral for a $400 million (£200 million) loan......
.....It (Barclays) claims that it was defrauded by the unit and Matthew Tannin, a Bear Stearns fund manager, with the help of Ralph Cioffi, another executive....
.....Barclays alleges that Mr Cioffi and Mr Tannin misled it over the value and security of the funds, the High-Grade Structured Credit Strategies Fund and the High-Grade Structured Credit Strategies Enhanced Leverage Fund.
In the court papers Barclays also claims that Bear Stearns dumped troubled investments in the riskier of the two funds.
It states: "Bear Stearns, BSAM and Cioffi hatched a plan to make more money for themselves and further to use the Enhanced Funds a repository for risky, poor-quality investments by creating a new investment vechicle called Everquest Financial Ltd ... co-led by Cioffi and through which he stood to benefit personally." ....
Bear Stearns Cos.' James ``Jimmy'' Cayne plans to hand over the chief executive officer role to his hand-picked successor, staying on as chairman as the firm tries to recover from the collapse of the subprime mortgage market, a person with direct knowledge of the matter said.
Board members have been notified by Cayne, 73, that he will step down as CEO of the New York-based company, according to the person, who declined to be named because the decision isn't public. He will be succeeded by President Alan Schwartz, 57, and an announcement may be made as soon as today, the person said.
Cayne would join former Citigroup Inc. CEO Charles Prince and his counterpart at Merrill Lynch & Co., Stan O'Neal, who left after the sinking value of assets tied to mortgages eroded earnings. Bear Stearns's fourth-quarter loss of $854 million was the first in its history and the company's stock dropped 53 percent in New York trading during the past year, more than any Wall Street rival................
..
Bear Stearns Cos., the fifth-largest U.S. securities firm, is closing a hedge fund that invested in asset-backed securities, abandoning a salvage plan after the fund plummeted at least 39 percent last year.
The Bear Stearns Asset Backed Securities fund, which in August held about $900 million of investments backed by assets including home mortgages, dropped 21.4 percent in November alone, the New York-based company told investors in a Dec. 20 letter obtained by Bloomberg News. The fund lost more than $300 million between August and the end of November.
Bear Stearns said it would return $90 million in cash to investors immediately. The fund's remaining assets, which the company valued at about $500 million as of Nov. 30, will be sold and the proceeds refunded over an unspecified period of time, according to the letter. Bear Stearns spokeswoman Jane Slater confirmed the letter's contents.....
..
Bear Stearns Co. executives realized late afternoon of March 13 that the firm wouldn't be able to withstand what was effectively a ``run on the bank,'' the Wall Street Journal reported, citing unidentified people familiar with the events.
At about 4:30 p.m. local time that day Chief Executive Officer Alan Schwartz became ``convinced'' Bear Stearns was facing a "desperate situation'' after securities firms began insisting on cash instead of accepting collateral and hedge funds started withdrawing cash, the newspaper said. ......
The Federal Reserve and JPMorgan agreed Friday to rescue Bear Stearns after its cash position "significantly deteriorated," sparking concerns of a global financial crisis and sending the brokerage's stock crashing 47% to a 91/2-year low......
Comments
Bear hunting
....The $1.6 billion bailout package Bear put up is almost certain to be paid back. The lenders who backed the funds initially have been paid back, too. The investors - Bear's clients - on the other hand, will get a "thank you" and "come again soon."....
The only question that remains is how much of the $1.6 billion bailout package will Bear get back? DJO believes they will get it all back.
...
TJ -
That's not exactly my concern. My issue was more clarity at the next level - when I'm seeing news quotes like this one (from the FT no less on Aug 7) that don't appear accurate. Bear may have lost $1.6B or $3B but that's a whole lot different than what that statement "near total losses on subprime bets worth more than $20bn" implies. That says to me that lost almost $20bn and I don't believe that is the case.
Some (not you) have tried to put a whole lot of words in my mouth on this issue. I was only interested in getting an accurate portrayal of the impact of a fairly narrow topic and that effort was pretty grossly misconstrued.
I too have noticed that the MSM has repeatedly reported that Bear lost around $20 billion with those hedge funds. I now interpret that to mean that those two hedge funds lost $20 billion in "market value" before they were shut down. Not that Bear Stearns was out $20 billion.
It makes for a more dramatic headline / news story to say that Bear lost $20 billion rather than the $1.6 billion they actually put up for the bailout.
Bear Stearns Judge Delays Ruling Banning U.S. Suits
A federal judge refused to grant permanent protection from U.S. lawsuits for Bear Stearns Cos.' two bankrupt hedge funds, questioning whether the Cayman Islands should be the principal site of their liquidation.
U.S. Bankruptcy Judge Burton Lifland in New York today said he ``will issue a decision in the next week to 10 days'' on whether Bear Stearns picked the proper jurisdiction for the funds, whose assets are mostly located in New York. He banned any suits against the funds while he deliberates........
..
United States: U.S. Bankruptcy Court Declines to Recognize Bear Stearns' Cayman Liquidation
Troubled offshore funds may have to become more creative in looking to protect their U.S. assets from creditors, if a controversial new bankruptcy court decision is upheld. A U.S. bankruptcy court in New York has declined to recognize the Cayman Islands liquidation proceedings filed by two Bear Stearns hedge funds whose Cayman liquidators had sought to protect against seizure of U.S. assets by filing petitions for protection under Chapter 15 of the Bankruptcy Code. Chapter 15 is a comparatively new addition to U.S. law, and the meaning and effect of that law are still being tested. .........
..
............In a controversial Opinion issued on August 30, 2007 by Bankruptcy Judge Burton R. Lifland, the court declined to recognize the funds' Cayman liquidation proceedings, whether as "foreign main" or "foreign non-main." Instead, Judge Lifland invited the funds' foreign representatives to commence an involuntary Chapter 11 proceeding, if protection for U.S. assets was desired. Judge Lifland held that a Cayman exempted company could not, under Cayman Law, have the requisite "center of main interest," or COMI, in the Caymans, as exempted companies must inherently transact business abroad. As for the Bear Stearns funds, Judge Lifland opined that the funds' COMI was likely in New York, despite registration in the Cayman Islands, as the funds' day-to-day operations and assets were New York-based. Without a COMI in the Cayman Islands, Judge Lifland declined to deem the Cayman liquidation proceedings as the funds' main proceeding.......
It appears Mr. Lewis may be doing some bottom fishing:
Billionaire Snaps Up Bear Stearns Stake
British billionaire Joseph Lewis, a magnate who controls more than 170 companies, has acquired a 7 percent stake in investment bank Bear Stearns Cos., becoming one of its largest shareholders.
Lewis, who runs Florida-based investment vehicle Tavistock Group, bought 8.1 million shares between Aug. 6 and Sep. 7, according to documents filed Monday with the Securities and Exchange Commission. That would make him the investment bank's largest shareholder, assuming no others holders have adjusted their stakes substantially of late......
..
From Calculated Risk:
A New Bear Stearns Deal
It used to be basically impossible to keep up with the terms of newly-issued mortgage deals, but you could at least stay up to date with downgrades. Now that the situation is completely reversed, I thought it might be interesting to look at the terms of one of the very few new issues out there.....
..
edit:
Looks like this is right. Just confirmed with by reading the text of the analyst call over at Seeking Alpha
London Investors Poised to Join Action Against Bear Stearns
A group of London investors is expected to join shortly an arbitration claim filed in the U.S. against Bear Stearns & Co. for allegedly misrepresenting the risk and return of two failed hedge funds. Legal action was initiated on Aug. 1 by New York securities law firms Zamansky & Associates and Rich & Intelisano on behalf of an undisclosed investor.......
..........In the original complaint, filed with an NASD arbitration tribunal, the U.S. investor charges that the Bear funds never provided transparent disclosure about the full extent of their sub-prime exposure due to investments in pooled collateralized debt obligations and asset-backed securities. "In fact," says the filing, "investors were not given full disclosure until well after it was too late for them to redeem their investments, and the fund was worthless."
Zamansky also alleges that Bear Stearns misstated the funds' returns. "We believe that Bear Stearns misrepresented the risk to investors of these funds," he said. "Bear represented that they had risk controls in place to mitigate losses. On conference calls, they [also] misrepresented the performance of the funds to prevent a run on the bank." If true, such actions would constitute securities fraud under the Securities Exchange Act of 1934.
A spokesperson for Bear Stearns said that "the allegations are unjustified and without merit. The accredited, high-net-worth investors in the fund were made very aware that this was a high-risk, speculative investment vehicle.".......
..
Those were informative articles.
I think Bear Stearns will survive. What's a measly $200 million. Somebody will just have to do without their Christmas bonus this year, maybe.
from WSJ by way of Calculated Risk
It is interesting that Bear got most (all?) of the media coverage, but Merrill, UBS etc. took a bigger hit. I guess that says something about the objectivity of the media or maybe Bear just didn't hide the problem as well.
I think I read somewhere that two top Merrill execs got canned because of the subprime problem.
Not really odd. Typical is more how I would describe it. The USA is at cultural stage now where there are haves and nots. The haves will use everything they've got to keep the gap until something drastic happens.
And guess what, Markman is not usually a very bearish writer. Most of his posts are about specific stocks he recommends and the like. When I first saw this listed on MSN, I assumed it was from Fleckstein or the like.
One rule of thumb is when the moderates start clamoring, it's time to listen. This is true in economics, politics, and global warming.
There just seems to be a little more clamoring than usual lately.
Citic, which is owned by the investment arm of the Chinese government, will invest in Bear Stearns through 40-year convertible trust preferred securities that will convert to about 6 percent of Bear Stearns' outstanding shares. Citic could potentially increase the stake to 9.9 percent.
Bear Stearns will acquire a similar stake in Citic through a six-year convertible debt security. Bear Stearns will also have options to acquire additional shares.
The announcement of the deal was fairly swift, as Vice Chairman Jiang Dingzhi of the China Banking Regulatory Commission said last Tuesday at a Communist Party meeting that Citic was interested in investing in Bear Stearns.
Aside from the cross-investment, the pair will form a new joint venture based in Hong Kong that will offer capital markets services across all of Asia. Bear Stearns will contribute its current Asian operations in Hong Kong, Tokyo and Singapore to the new joint venture. Citic will contribute its operations in Hong Kong and pay Bear Stearns a financial consideration for the new 50-50 joint venture.
The new venture will offer a range of products, including cross-border mergers and acquisitions advisory, international equity and fixed income offerings and venture capital, private equity and asset management services.
Each company is expected to have representation on the other's board of directors.
Bear Stearns is coming off a rocky summer in which two hedge funds it managed went bankrupt, losing billions of dollars on bad bets in the subprime mortgage industry.
Bear Stearns' earnings were among those hardest hit by rising delinquencies and defaults among subprime mortgages _ loans given to customers with poor credit history _ and the declining value of securities backed by the risky loans.
In recent months, as Bear Stearns tried to rebound from the credit crunch, there was heavy speculation the company would seek an outside investment, particularly one from Asia.
Bear Stearns has lagged behind its competitors in size and scope of operations, especially in Asian markets, making Citic a fit to diversify and grow its business.
Shares of Bear Stearns rose $1.09 in premarket trading to $117.50.
Finance is Global.
This drama never seems to end --
Investors in defunct Bear Stearns funds seek control
Investors in two highly leveraged Bear Stearns Cos. hedge funds that went belly up in the summer are taking an unusual tack in an effort to probe possible wrongdoing in the fund's operations, said a person involved with the effort.
Investors who lost about $650 million in the Bear Stearns High-Grade Enhanced Leverage fund, known as Hegel, are scheduled to vote at Bear Stearns headquarters in New York on Nov. 7 and in London on Nov. 14 on whether to install a forensic accounting and restructuring firm in place of Bear as controlling party
More than 10% of investors in two so-called feeder funds have petitioned for the change, setting up the vote, the person said. If more than 50% of investors, as measured by capital invested in Hegel, approve, Bear will be replaced as controlling party by FTI Capital Advisors, a broker-dealer subsidiary of FTI Consulting Inc. in Washington, D.C
Lawyers at Reed Smith and some other firms representing institutional investors in the funds have complained that Bear is not cooperating in providing information on the names of all investors or on the activities that led to the funds' demise. FTI would be charged with conducting an investigation to see if there is cause to sue......
......By installing an investigative firm at the center of the funds, which were heavily invested in collateralized debt obligations tied to subprime mortgages, investors hope to pressure Bear Stearns to cooperate, another person said......
......Separately, Massachusetts securities regulators are investigating whether Bear Stearns had a conflict of interest by improperly trading with the two in-house hedge funds, saddling investors with added losses. Bear infused about $1.6 billion into one of the funds in an effort to save it prior to its collapse.
.
Bear Stearns CEO denies WSJ allegations
.
Bear Stearns Cos. Chief Executive James Cayne on Thursday denied regularly smoking marijuana, after a front-page Wall Street Journal article claimed he was frequently away from work playing golf and bridge, and sometimes smoked the drug on such outings......
.
Bear Stearns Cuts Subprime Assets, Limits Writedown
Bear Stearns Cos., after posting its biggest earnings decline in more than a decade, reduced subprime holdings by 50 percent in the past two months, limiting writedowns in the fourth quarter to $1.2 billion......
.
Investors in London have successfully wrested control of one of the collapsed Bear Stearns hedge funds from its previous management and directors as a first step towards seeking recovery of some of their losses....
This article provides a good overview:
.
Dissecting The Bear Stearns Hedge Fund Collapse
.
Bear Stearns Posts 4Q Loss
Bear Stearns Cos. said Thursday a bigger-than-expected writedown in its mortgage portfolio caused the nation's fifth-largest U.S. investment bank to post the first loss in its 84-year history.
It took a $1.9 billion writedown in the quarter ended Nov. 30 as its mortgage-backed securities continued to lose value amid the global credit crisis. That was much larger than the $1.2 billion it expected in November.
Bear Stearns' fiscal fourth-quarter loss, and collapse of two hedge funds it managed during the summer, prompted Chief Executive Jimmy Cayne to pass on his 2007 bonus. Members of the company's executive committee also will not receive year-end bonuses.....
......The fiscal fourth-quarter loss after paying preferred dividends was $859 million, or $6.90 per share, compared to a profit of $558 million, or $4 per share, a year earlier. The company had negative net revenue of $379 million, compared to revenue of $2.41 billion a year earlier.
The results broadly missed Wall Street expectations, as analysts were unable to get a handle on exactly how exposed Bear Stearns was to risky subprime mortgage securities. Analysts polled by Thomson Financial had expected a loss of $1.79 per share on $625.1 million of revenue for the quarter. No analyst polled by Thomson expected a loss of more than $2.45 per share......
..
From Calculated Risk
......"If the counterparties (insurers) blow up, Bear Stearns losses will be much larger.".....
Bear Stearns Conference Call
.
The Bear Flu: How It Spread
A novel financing scheme used by Bear Stearns' hedge funds became a template for subprime disaster
When the subprime mortgage market began to unravel late in 2006, global bond markets barely flinched. But when two Bear Stearns (BSC) hedge funds collapsed in June, the event sparked a global credit crisis that has yet to ease. New evidence sheds light on how those hedge funds—and their managers—became star players in the subprime bust, the biggest financial disaster in decades. The revelations also show how other players in the mortgage market adopted the Bear funds' tactics, collectively building a financing structure with many of the hallmarks of a pyramid scheme.......
.
Barclays sues Bear Stearns over hedge fund collapses
Barclays is suing Bear Stearns for allegedly misleading it over the performance of two collapsed hedge funds that were used as collateral for a $400 million (£200 million) loan......
.....It (Barclays) claims that it was defrauded by the unit and Matthew Tannin, a Bear Stearns fund manager, with the help of Ralph Cioffi, another executive....
.....Barclays alleges that Mr Cioffi and Mr Tannin misled it over the value and security of the funds, the High-Grade Structured Credit Strategies Fund and the High-Grade Structured Credit Strategies Enhanced Leverage Fund.
In the court papers Barclays also claims that Bear Stearns dumped troubled investments in the riskier of the two funds.
It states: "Bear Stearns, BSAM and Cioffi hatched a plan to make more money for themselves and further to use the Enhanced Funds a repository for risky, poor-quality investments by creating a new investment vechicle called Everquest Financial Ltd ... co-led by Cioffi and through which he stood to benefit personally." ....
Everquest
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Cayne to Step Down as Bear Stearns CEO, Person Says (Update5)
Bear Stearns Cos.' James ``Jimmy'' Cayne plans to hand over the chief executive officer role to his hand-picked successor, staying on as chairman as the firm tries to recover from the collapse of the subprime mortgage market, a person with direct knowledge of the matter said.
Board members have been notified by Cayne, 73, that he will step down as CEO of the New York-based company, according to the person, who declined to be named because the decision isn't public. He will be succeeded by President Alan Schwartz, 57, and an announcement may be made as soon as today, the person said.
Cayne would join former Citigroup Inc. CEO Charles Prince and his counterpart at Merrill Lynch & Co., Stan O'Neal, who left after the sinking value of assets tied to mortgages eroded earnings. Bear Stearns's fourth-quarter loss of $854 million was the first in its history and the company's stock dropped 53 percent in New York trading during the past year, more than any Wall Street rival................
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Bear Stearns Shuts Asset-Backed Hedge Fund After Loss (Update1)
Bear Stearns Cos., the fifth-largest U.S. securities firm, is closing a hedge fund that invested in asset-backed securities, abandoning a salvage plan after the fund plummeted at least 39 percent last year.
The Bear Stearns Asset Backed Securities fund, which in August held about $900 million of investments backed by assets including home mortgages, dropped 21.4 percent in November alone, the New York-based company told investors in a Dec. 20 letter obtained by Bloomberg News. The fund lost more than $300 million between August and the end of November.
Bear Stearns said it would return $90 million in cash to investors immediately. The fund's remaining assets, which the company valued at about $500 million as of Nov. 30, will be sold and the proceeds refunded over an unspecified period of time, according to the letter. Bear Stearns spokeswoman Jane Slater confirmed the letter's contents.....
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What an appropriate way to end this thread (maybe).
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Bear Stearns Realized Need for Funding March 13, WSJ Says
Bear Stearns Co. executives realized late afternoon of March 13 that the firm wouldn't be able to withstand what was effectively a ``run on the bank,'' the Wall Street Journal reported, citing unidentified people familiar with the events.
At about 4:30 p.m. local time that day Chief Executive Officer Alan Schwartz became ``convinced'' Bear Stearns was facing a "desperate situation'' after securities firms began insisting on cash instead of accepting collateral and hedge funds started withdrawing cash, the newspaper said. ......
I'm shocked that Bear's customers were insisting on cash. Could it have anything to do with how Bear treated investors previously?
Bernanke Discards Monetary History With Bear Stearns Bailout
Bear Stearns Dives After Fed Steps In With Bailout Funds
The Federal Reserve and JPMorgan agreed Friday to rescue Bear Stearns after its cash position "significantly deteriorated," sparking concerns of a global financial crisis and sending the brokerage's stock crashing 47% to a 91/2-year low......