Bear Stearns rescues hedge fund

The Bear Stearns Co. Inc. today said it would chip in up to $3.2 billion to help a struggling hedge fund that it manages. The Bear Stearns High Grade Structured Credit Fund will get the money it needs to replace secured financing, reduce creditors' leverage and improve liquidity. The cash will also help eliminate exposure that banks, such as Citigroup and Barclays, had to the fund, a source told Reuters. Just yesterday, Merrill Lynch and Co. Inc. stepped away from its threat to drop $850 million in securities from Bear Stearns' hedge funds. Instead, the firm sold $100 million of its collateralized debt obligations, holding on to the rest of the securities in the meantime. "That uncertainty in the marketplace surrounding these funds has made an orderly de-leveraging difficult," said Bears Stearns chairman and CEO James E. Cayne, in a statement. "By providing the facility we believe we will stabilize financing, reduce uncertainty in the marketplace and allow for an orderly process to de-leverage the High Grade Fund." Recently, Wall Street creditors, such as JPMorgan Chase & Co. and Lehman Brothers Holdings Inc., have been putting their collateral on sale. Bear Stearns is still working a deal to help a second troubled hedge fund, High Grade Structured Credit Strategies Enhanced Leverage Fund, according to Reuters.