Basis Capital Second sub-prime investor calls in Blackstone
Thursday, August 9th, 2007Second sub-prime investor calls in Blackstone
24 Jul 2007
Troubled Australian hedge fund Basis Capital has appointed US alternatives firm and financial adviser The Blackstone Group to help restructure its investments in sub-prime mortgage securities.
Basis Capital, which has more than A$2bn (€1.3bn) of assets under management, last week delayed publication of the valuation of its yield alpha and Pac-rim opportunity funds amid reports it had made losses in sub-prime mortgages.
Basis said: “Both funds have recently suffered from an adverse reaction by some investment banks to a downgrading of US sub-prime assets and collateralized debt obligations, whereby prices were marked down, negatively affecting valuations, despite continued performance of the underlying assets.”
It appointed Blackstone over the weekend, according to a source close to the situation.
Blackstone’s restructuring team will be led by Martin Gudgeon, the former chief executive of Close Brothers Corporate Finance hired by the US firm late last year to build a European restructuring advisory group.
Blackstone is also advising Bear Stearns on the restructuring of two sub-prime hedge funds that last week revealed losses amounting to almost all the value of their equity.
Blackstone runs its own hedge funds and could even be on the other side of trades entered by Basis Capital and Bear Stearn’s funds. This would expose it to a potential conflict of interest, however Blackstone has said it operates oversight committees to manage potential conflicts.