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MELBOURNE - Troubled Australian hedge fund Basis Capital said yesterday it had appointed US-based Blackstone Group as financial adviser to two of its funds, to help try to prevent a fire sale of its assets.
Basis warned last week that some of its investors could receive less than
50c in the dollar in the latest fall-out from the US subprime mortgage market's woes that have swept through Wall Street.
The fund said yesterday that two of its funds suffered from the downgrading of subprime assets and collateralised debt obligations (CDOs), "despite continued performance of the underlying assets".
"Blackstone's role will include negotiating with investment banks to prevent adverse pricing and selling of assets," Basis Capital said.
Some of Basis Capital's eight bankers have already severed their ties with the ailing fund and sold underlying assets at a deep discount, the Australian newspaper reported.
Blackstone has advised subprime funds run by Bear Stearns, which were hit by the dramatic downgrading of the subprime market.
Basis Capital said in its defence its combined leverage in the troubled funds was less than two times, which it said compared with Bear Stearns' gearing level of more than 10 times.
The Basis funds' assets also include some liquid Asian debt, it added.
It has suspended redemptions in its Basis Aust Rim Opportunity Fund and Basis Yield Fund, and has appointed accountants Grant Thornton to advise on an orderly sale of assets.
Earlier, ratings agency Standard & Poor's said it was keeping its fund rating for Basis Capital on hold following a meeting with management.
"This meeting has provided us with a greater understanding of the current issues, the suspension of redemptions, net asset value calculation difficulties, and the appointment of Grant Thornton," said S&P fund analyst Greg Barr. However, S&P added that Basis management was unable to provide comment beyond what has been disseminated to investors.
Both of the troubled funds were rated five stars, S&P's highest rank, until July 18 when they were put on hold.
The funds management arms of some of Australia's biggest banks have more than A$300 million ($328.5 million) in exposures to the troubled Basis funds, which were offered to retail investors through a variety of investment platforms.
- REUTERS