Bankruptcy Court Correctly Concluded Two Overseas Bear Stearns Hedge Funds Were Not Entitled to Chapter 15 Protection According to Latest ABI Quick Poll
Contact: John Hartgen
BANKRUPTCY COURT CORRECTLY CONCLUDED TWO OVERSEAS BEAR STEARNS HEDGE FUNDS WERE NOT ENTITLED TO CHAPTER 15 PROTECTION, ACCORDING TO LATEST ABI QUICK POLL
August 11, 2008, Alexandria, Va. — A majority of respondents (52 percent) in a recent ABI Quick Poll agreed that a bankruptcy court was correct in concluding that two overseas Bear Stearns hedge funds were not entitled to recognition under chapter 15 of the U.S. Bankruptcy Code. Thirty-eight percent of respondents “strongly agreed” and 14 percent “somewhat agreed” that the court was correct in determining that the hedge funds had to file under chapter 11 of the Bankruptcy Code or continue with an overseas liquidation.
Thirty-five percent of respondents, however, thought that the bankruptcy court erred in not allowing the two overseas Bear Stearns hedge funds to file under chapter 15 of the Bankruptcy Code. Twenty-one percent “disagreed strongly” and 14 percent “somewhat disagreed.” Ten percent of respondents did not know or had no opinion on the issue.
In the case of In re Bear Stearns High-Grade Structured Credit Strategies Master Fund Ltd., the bankruptcy judge declined to recognize that the two bankrupt Bear Stearns hedge funds satisfied the requirement established by chapter 15 to have a “center of main interest” outside the United States. While the two hedge funds were incorporated under Cayman Island law, none of the funds’ employees, managers or investors were based in the Cayman Islands and that the assets and records of the two funds were located in the United States, according to the judge’s ruling. Despite an appeal by Bear Stearns, the bankruptcy court’s ruling was affirmed by a district court that the two hedge funds would have to either file in the United States under chapter 11 or liquidate under Cayman law.
ABI members and members of the public were welcome to submit their response to the statement: “The bankruptcy court did not err in concluding that the two overseas Bear Stearns hedge funds were not main or nonmain proceedings entitled to recognition under chapter 15 of the Bankruptcy Code. In re Bear Stearns High-Grade Structured Credit Strategies Master Fund Ltd., S.D.N.Y. No. 07-12383, 5/27/08).
ABI’s Quick Poll is posted on ABI’s home page, www.abiworld.org. ABI members and the public are invited to respond to a question on a timely bankruptcy or insolvency issue. Visit http://www.abiworld.net/quickpoll/ to access the results of previous ABI Quick Polls.
ABI is the largest multi-disciplinary, nonpartisan organization dedicated to research and education on matters related to insolvency. ABI was founded in 1982 to provide Congress and the public with unbiased analysis of bankruptcy issues. The ABI membership includes nearly 11,700 attorneys, accountants, bankers, judges, professors, lenders, turnaround specialists and other bankruptcy professionals, providing a forum for the exchange of ideas and information. For additional information on ABI, visit www.abiworld.org. For additional conference information, visit http://www.abiworld.org/conferences.html.