Bear Reassures Market on B&C Hedge Funds

Bear Stearns & Co. tried to reassure investors Friday that a $3.2 billion loan to a subprime-related hedge fund it manages is adequately collateralized.In a conference call, Bear Stearns chief financial officer Sam Molinaro said the Wall Street firm is trying to restructure the hedge fund (and a similar one) but that the process could take several months. On Wednesday night Merrill Lynch, a lender to one of the funds, liquidated roughly $850 million in collateral after the fund failed to meet its margin calls. Sources say that on Thursday two other lenders to the funds -- Bank of America and Goldman Sachs & Co. -- were contemplating seizing collateral because of margin call concerns, but then reached some type of agreement with Bear. One investment banking source described BoA's and Goldman's actions as "self-preservation on the part of all three." The two Bear funds reportedly own subprime asset-backed and residual securities and have positions in the ABX index.