Bear funds denied bankruptcy protection

A U.S. judge denied Bear Stearns Cos. Inc. bankruptcy protection for two failed hedge funds and refused to grant protection from U.S. lawsuits. The New York-based firm was, however, given 30 days to refile before investors can seize the funds' assets. Judge Burton Lifland of the U.S. Bankruptcy Court in Manhattan denied Bear Stearns' Chapter 15 request, which would allow the funds to seek bankruptcy protection in the U.S. while liquidating in the Cayman Islands. ``The only adhesive connection with the Cayman Islands that the funds have is the fact that they are registered there,'' Lifland wrote in a ruling in New York, noting that most assets were originally in the U.S., according to Bloomberg. New York-based Bear must now petition under either Chapter 7 or Chapter 11 of the bankruptcy code to protect it from investors in the U.S. However, if there are no filings, the injunction from Aug. 9 will dissolve at the end of the 30-day period. The two funds-the Bear Stearns' High-Grade Structured Credit Strategies Master Fund and the High-Grade Structured Credit Strategies Enhanced Leverage Master Fund-placed wrong-way bets on securities backed by subprime mortgage loans. Bear bought out investors' positions after Wall Street companies began demanding repayment by initiating margin calls on the funds.