Bull vs. Bear - Merrill seizes assets of Bear Stearns subprime fund

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In case you missed it this weekend, Merrill seized $400mm in assets from a Bear Stearns hedge fund and is auctioning them off starting today. The Ralph Cioffi led fund scrambled to avoid liquidation late last week, auctioning off over $4bn worth of bonds Thursday morning alone, culminating a protracted struggle to sell assets to stay afloat. The fund has sold $7bn worth of bonds since May and frozen redemption requests.
After the late-week scramble, the fund presented a 30-day asset sale plan to lenders that would ease future margin call pressure. Merrill wasn't convinced, issued a list of collateral securities it was owed and seized the assets. The bidding for these starts at noon today, and could cause ripples across the Street, depending on how the market values less liquid mortgage-backed securities.
The Merrill seizure could signal (finally) the end of the High-Grade Structured Credit Strategies Enhanced Leverage Fund at Bear, following the other, less drawn out, subprime fund blowouts like Dillon Read at UBS. The Bear fund originally raised $600mm in investor capital and borrowed $6bn from banks to bet the wrong way on the ABX.
A 'Subprime' Fund Is on the Brink [Wall Street Journal]

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