January 31st, 2008
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HedgeCo.Net (West Palm Beach) Once a premier hedge fund in Australia, Basis Yield Alpha has just been valued at 2 cents on the dollar, by its former sister fund Sydney-based Basis Capital. This latest set-back is just another blow in a series of events that have rocked investments backed by sub-prime mortgages. Earlier this month, a judge denied rapid repayment to investors by failing to acknowledge its Cayman Island bankruptcy.
Basis isn’t the only company dealing with reluctance from U.S. judges. Bear Stearns has unsuccessfully attempted to liquidate two failed funds in the Caymans. This just goes to show that while offshore funds may be able to avoid U.S tax regulations, the bankruptcy regime is unavoidable. While Basis and its investors are Cayman-based, there is a lack of transparency when it comes to where the fund actually does business. This is raising some red flags for U.S. judges, including Judge Robert Gerber, who is presiding over the Basis case.
The only way that foreign law will take reign is if Gerber sides with Basis Yield and allows them to file Chapter 15. The U.S. would then take a back seat as foreign courts liquidated funds and distributed assets.
Basis Yield Alpha was worth over $700 million in early 2007. Steve Akers, who serves as the fund’s joint liquidator, said that they would be able to make a small repayment to investors, probably around $62 million.
Julie Scuderi
Contributing Editor for HedgeCo.Net
Email: julie@hedgeco.net
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