Tuesday, July 17, 2007

Bear Stearns funds nearly worthless

From Yahoo news:

Weeks after the meltdown of two prominent Bear Stearns Cos. (BSC) hedge funds that bet heavily on the market for risky home loans, the brokerage has told the funds' investors that the portfolios' assets are almost worthless, according to people familiar with the matter.

The assets in Bear's more levered fund, the High-Grade Structured Credit Strategies Enhanced Leverage Fund, are worth virtually nothing, according to people familiar with the matter. The assets in the other larger, less-levered fund are worth roughly 9% of the value since the end of April, these people said. The April valuations weren't immediately available but in March, before their sharp losses, the enhanced leverage fund had $638 million in investor money, while the other fund had $925 million.

The two funds have been in the spotlight for weeks after suffering heavy losses in the subprime market. Late last month, Bear helped stabilize the less- levered fund with a $1.6 billion secured loan; the enhanced fund began trying to unwind its remaining $1.1 billion in debt.

Bear disclosed this information to investors earlier Tuesday and is expected to make a statement Tuesday evening, these people said. A spokeswoman for Bear didn't return calls for comment.

These losses, which took more than two weeks to calculate because of the fluctuating values in the market for risky, or subprime, mortgage securities, came amid another tumultuous day for the broader mortgage market. One particularly wobbly slice of the market tracked by a closely watched index called the ABX fell to an all-time low of 44.


Realestateslasher said...

What does this all mean?

How does this effect the
Realestate Market?

Who will benefit?

Bakersfield Bubble said...

This is a site that has covered this very closely from the beginning:


Bottom line - risk is back in play.

The days of cheap and easy credit are gone. The market will now (as they already have) start to price in risk on mortgage and other credit. This will mean credit spreads for individuals will rise.

That loan from 1-2 years ago that was 6.75% all in, with everything the same today, that loan will now be priced 100-250 bps higher.