Merrill accelerated Bear hedge debacle

A move by Merrill Lynch helped speed up the deterioration of one of Bear Stearns’ collapsed hedge funds, court documents show.
The Bear Stearns High-Grade Structured Credit Strategies Enhanced Leverage Fund performed poorly early this year and suffered significant devaluation of its asset portfolio by late May. This led to margin calls from the fund’s trading counterparties.
Around June 20, Merrill Lynch issued a bid list to some of its clients and then sold off some of the Enhanced Fund’s assets.
The move increased the downward pressure on the relevant asset classes and led to a revaluation of the fund’s assets, court papers said.
Earlier this week, the Enhanced Fund and the failed High Grade Structured Credit Strategies Fund applied for Chapter 15 bankruptcy in Manhattan. U.S. Bankruptcy Judge Burton R. Lifland has blocked all suits against the funds until August 9, documents show.
On Monday, the Enhanced Fund’s board of directors passed a resolution to wind up the fund’s assets under the provisions of Cayman Islands law, which is where the funds are registered.