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Basis Capital Files For BankruptcySeeks Cayman Protection, Just Like Those Bear Stearns Funds

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Another hedge fund hit hard by the contamination from subprime sludge has filed for bankruptcy. This time it’s Basis Capital, an Australian hedge fund, that has thrown in the towel. And once again, it’s hoping it’s towel lands on the beach in the Cayman Islands.
Losses in the Basis Yield Alpha Fund could exceed 80 percent, according to Bloomberg. Basis Capital was founded in 1999 by Australian bankers Steve Howell and Stuart Fowler. As recently as May, the firm had more than $1 billion in assets under management.
At the end of July, two Bear Stearns funds filed for bankruptcy in the Cayman Island, and asked a US judge to block any lawsuits from lenders and investors while the bankruptcy in the Caymans went ahead. The judges in the Caymans have a record of favoring fund managers, which has made the Caribbean nation an attractive place for hedge funds to organize. Three out of four hedge funds globally are incorporated in the western Caribbean islands.
The judge in the Bear Stearns case has not yet blocked lawsuits against the funds, saying he needed more time to decide what to do. Most of the assets of both the Bear Stearns funds and the Basis fund are reportedly in the US.
Several big Wall Street firms are lenders to the Basis fund. JP Morgan Chase Bank, Goldman Sachs , Citigroup, Morgan Stanley, Lehman Brothers and Merrill Lynch are all reportedly listed as creditors.
Basis Yield Files Bankruptcy Over Subprime Defaults [Bloomberg]