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Wednesday, July 18, 2007

Bear Stearns Tells Fund Investors `No Value Left'

" Bear Stearns Cos. told investors in its two failed hedge funds that they will get little if any money back after "unprecedented declines'' in the value of AAA rated securities used to bet on subprime mortgages.

Estimates show there is "effectively no value left'' in the High-Grade Structured Credit Strategies Enhanced Leverage Fund and "very little value left'' in the High-Grade Structured Credit Strategies Fund, Bear Stearns said in a two-page letter. The second fund still has "sufficient assets'' to cover the $1.4 billion it owes Bear Stearns, which as creditor gets paid back first, according to the letter, obtained yesterday by Bloomberg News from a person involved in the matter. "

Well, at least Bear Stearns gets its money back. Everybody else: -100%...

" "This is a watershed,'' said Sean Egan, managing director of Egan-Jones Ratings Co. in Haverford, Pennsylvania. "A leading player, which has honed a reputation as a sage investor in mortgage securities, has faltered. It begs the question of how other market participants have fared.'' "

A few more downgrades by Moodys and S&P and we'll suddenly discover a whole pile of dead cockroaches. The market is not taking this well. Futures down significantly this morning and that was after touching 14 000 on the DOW yesterday.

Source: Bear Stearns Tells Fund Investors `No Value Left' (Update2) (http://www.bloomberg.com/apps/news?pid=20601087&sid=ajzRNcPOZAdI&refer=home)