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Protection sought for Basis fund

August 30, 2007|From Times Wire Services

Basis Capital Fund Management in Australia sought bankruptcy protection for its Cayman Islands hedge fund, Basis Yield Alpha Fund, saying defaults in U.S. sub-prime mortgages resulted in losses that could exceed 80%.

The Basis Yield fund asked a court in the Cayman Islands for permission to liquidate its assets, according to a petition filed Wednesday in New York. The fund has assets and liabilities of more than $100 million, according to the petition.

The fund also asked the U.S. Bankruptcy Court to bar lawsuits in the U.S. while it liquidated in the Caymans.

Basis Capital, founded in 1999, had more than $1 billion in assets as recently as May. It lost money as defaults in home loans to the riskiest borrowers spread to broader credit markets. Basis followed Bear Stearns Cos. in seeking bankruptcy protection in the Caymans for a fund with clients in the U.S. and elsewhere. Bear Stearns' request for two hedge funds is pending.

Creditors of the Basis fund include JPMorgan Chase Bank N.A., Goldman Sachs International, Citigroup Global Markets Ltd., Morgan Stanley, Lehman Bros. International (Europe) and Merrill Lynch International, according to court documents. Those creditors all issued default notices to Basis Yield after its June devaluations.

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