Bear funds liquidators lose appeal

The liquidators of two Bear Stearns collapsed hedge funds lost a court appeal to liquidate them in the Cayman Islands.

The liquidators of two collapsed hedge funds from The Bear Stearns Cos. Inc. lost a court appeal to liquidate them in the Cayman Islands instead of in the United States, according to a Reuters report.
The ruling, by Robert Sweet, a U.S. district court judge in New York, upheld a bankruptcy court’s decision last year requiring that the funds be liquidated in U.S. courts.
Holding the proceedings in the Cayman Islands could have shielded the funds’ assets from some U.S. creditors.
The ruling could have implications for other funds seeking protection under Chapter 15 of the U.S. Bankruptcy Code, which covers cross-border insolvencies, according to the report.
Bear Stearns Asset Management Inc. of New York operated the two investments — the High-Grade Structured Credit Strategies Fund and the High-Grade Structured Credit Strategies Enhanced Leverage Fund — which folded last July (InvestmentNews, July 27) .
Both funds invested heavily in collateralized debt obligations backed by subprime mortgages.
Mr. Sweet said that the liquidators didn’t adequately show that the funds had a sufficient connection to the Cayman Islands.
The liquidators, Kristen Beighton and Simon Whicker, of KPMG LLP of New York, had appealed a ruling by Judge Burton Lifland of the Southern District of New York last year.