Judge rules in Bear Stearns’ favor

A federal judge refused to allow investors to seize the assets of two hedge funds of Bear Stearns' for 10 days, but indicated he is considering lifting the funds' U.S. bankruptcy protections. Judge Burton Lifland of the U.S. Bankruptcy Court in Manhattan said he hadn't reached a decision on the funds' request for U.S. Chapter 15 protection, which would allow the funds to seek bankruptcy law protection in the United States while liquidating the funds in the Cayman Islands, according to published reports. Provisional liquidators working to unwind the funds’ High Grade Structured Credit Strategies Master Fund and High-Grade Structured Credit Strategies Enhanced Leverage Master Fund could seek recoveries of $25 million and $50 million, respectively. Both funds bet heavily on mortgage loans and as defaults increased, creditors began to look for their collateral, leaving the funds short on cash. Bear Stearns stepped in and bought out investors' positions after big Wall Street firms started fleeing the larger fund earlier this year. The Bear Stearns hedge funds have asked Judge Lifland to recognize the Cayman Islands as the main jurisdiction for the proceedings, according to an Associated Press report. Judge Lifland said it appears the two funds, though registered in the Caymans, operated primarily out of New York.