Tuesday, June 26, 2007

This Bear Tried to Sell the Porridge

It appears that Bear Stearns would like to sell some of its assets to public shareholders.

Or not.

Everquest Financial’s initial public offering statement on May 9 disclosed that substantially all the assets in its $700 million portfolio had been bought from the Bear Stearns High-Grade Structured Credit Enhanced Strategies Fund and the High-Grade Structured Credit Strategies Enhanced Leveraged Fund.

The filing did not disclose that those funds had suffered heavy losses in March and April as assets held in them, many backed by subprime mortgages, plummeted in value. Bear Stearns hedge funds also held a $400 million stake in Everquest.

Yesterday afternoon, Everquest withdrew its offering, which was in the earliest stages.

Gee, why was THAT?

An analyst at Portales Partners, Charles Peabody, said in a note to clients last week that Everquest appeared to be an investment vehicle used in part “as a way for Bear Stearns to offload some of its own mortgage exposure.”

If Bear Stearns knew that two of its funds were in trouble by May, why did it allow the Everquest filing to proceed, Mr. Peabody asked.

Bear Stearns declined to comment.

What's the old saying? "When a bear s*&^s in the woods....."

HT: Calculated Risk

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