Cayman hedge funds to appeal bankruptcy ruling
Legal action over Bear Sterns hedge funds has already been described previously. To remind, Bear Stearns was forced to liquidate 2 hedge funds based in the Cayman Islands – Bear Stearns High-Grade Structured Credit Strategies Master Fund Ltd and Bear Stearns High-Grade Structured Credit Strategies Enhanced Leverage Master Fund Ltd – with estimated losses of USD 4 billion. It has also been discussed that experts consider the failure of 2 hedge funds could have severe repercussions on the offshore banking industry in Cayman.
Recently, it was revealed that the liquidators of Bear Stearns’s 2 bankrupt funds have appealed the ruling in the US Bankruptcy Court, which denied the request processed by the liquidators Simon Whicker and Kristen Beighton to liquidate not in the US, but in Cayman.
The liquidators are appealing the decision made by the court on August 30, which denied the Chapter 15 request covering cross-border liquidations. The hedge funds would have been allowed to use Chapter 15 protection in order to liquidate in Cayman, which would give them a higher degree of protection from creditors in the United States; but the request was denied as far as Judge Lifland decided that the hedge funds did not have enough presence in the Cayman Islands to have grounds for the Chapter 15 request. According to Judge Lifland, no employees or managers are located in the Cayman Islands, the investment manager for the funds is located in New York, while the administrator is in the United States along with the funds’ books and records.
However, it should be noted that Lifland granted Bear Stearns 30 days in order to refile the request before investors are seize assets.