Bear Steps Up. Street Exhales

Money never sleeps. Nor do the teams of people working to avert the biggest debacle since John Meriwether and his team of geniuses took us to the brink of disaster nearly ten years ago.

It was rather ironic that of the billions of dollars at stake in the hedge funds, very little of it was Bear Stearns’ capital. But that is about to change as the Bear steps up in a big, big way.

Bear Stearns Cos. plans to take on $3.2 billion of loans to stop creditors from seizing assets of one of its money-losing hedge funds in the biggest fund bailout since 1998, people with knowledge of the proposal said.

The firm told lenders to the High-Grade Structured Credit Strategies Fund yesterday that it would assume their loans, said the people, who declined to be named because the plan is confidential. The New York-based firm stepped in after Merrill Lynch & Co. took securities that backed $850 million in credit lines to two Bear Stearns funds and put them up for sale. JPMorgan Chase & Co. and Lehman Brothers Holdings Inc. also indicated they may take over collateral for loans they provided. Bloomberg

Bear was being rather short-sighted if they figured the Street would have to take all the pain for Cioffi’s recklessness. Maybe they are borrowing a page from Goldman’s Long Term Greedy philosophy, and just in the nick of time.

Financial meltdowns can really ruin a big weekend in the Hamptons.

Hopefully this bailout is a done deal. It has been a busy night of wrangling.

The following FT piece preceded the Bloomberg article by several hours.

Under that proposed deal, Bear said it would serve as the counterparty to $3.2bn in repurchase agreements between the banks to the less leveraged of the two troubled Bear hedge funds.

In return, the banks would have to agree not to seize and sell collateral held in the highly-leveraged fund for 90 days. It remained unclear last night whether any banks would accept any version of that deal. Financial Times

TGIF

Bear Stearns Plans $3.2 Billion Fund Rescue to Halt Fire Sale
Bloomberg

Bear Stearns to cancel Everquest IPO
Financial Times

Promotions at Bear Stearns
10/30/96
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