Dear John
From Bloomberg, a Dear John letter from Bear Stearns to its hedge fund investors.
Bear Stearns Cos. told investors in its two failed hedge funds that they'll get little if any money back after ``unprecedented declines'' in the value of 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 losses its clients now face underscore the severity of the shakeout in the market for collateralized debt obligations, or CDOs, investment vehicles that repackage bonds, loans, derivatives and other CDOs into new securities.
The risk of owning corporate bonds soared to the highest in two years in Europe and rose in the U.S., credit- default swap prices show.
Today's letter, addressed ``Dear Client of Bear, Stearns & Co. Inc.,'' recounts how the firm's two funds unraveled in less than a month.
The fund that now has nothing left for investors, known as the enhanced fund, had $638 million of capital as of March 31, according to performance reports sent to clients at the time.
It also borrowed about $11 billion to make bigger bets.
The larger fund, which had $925 million of capital in March, is down about 91 percent this year, according to a person with direct knowledge of the performance, who declined to be identified because the figures aren't public.
It borrowed almost $9 billion, and its remaining debt was taken over by Bear Stearns in the bailout.
``Let us take this opportunity to reconfirm that the Bear Stearns franchise is financially strong and committed to meeting your investment needs,'' the letter reads.
``Our highest priority is to continue to earn your trust and confidence every day.'' Alrighty then, makes me feel warm & fuzzy, how bout you?
Bear Stearns Cos. told investors in its two failed hedge funds that they'll get little if any money back after ``unprecedented declines'' in the value of 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 losses its clients now face underscore the severity of the shakeout in the market for collateralized debt obligations, or CDOs, investment vehicles that repackage bonds, loans, derivatives and other CDOs into new securities.
The risk of owning corporate bonds soared to the highest in two years in Europe and rose in the U.S., credit- default swap prices show.
Today's letter, addressed ``Dear Client of Bear, Stearns & Co. Inc.,'' recounts how the firm's two funds unraveled in less than a month.
The fund that now has nothing left for investors, known as the enhanced fund, had $638 million of capital as of March 31, according to performance reports sent to clients at the time.
It also borrowed about $11 billion to make bigger bets.
The larger fund, which had $925 million of capital in March, is down about 91 percent this year, according to a person with direct knowledge of the performance, who declined to be identified because the figures aren't public.
It borrowed almost $9 billion, and its remaining debt was taken over by Bear Stearns in the bailout.
``Let us take this opportunity to reconfirm that the Bear Stearns franchise is financially strong and committed to meeting your investment needs,'' the letter reads.
``Our highest priority is to continue to earn your trust and confidence every day.'' Alrighty then, makes me feel warm & fuzzy, how bout you?
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