By Laura Cochrane and Tiffany Kary
Aug. 30 (Bloomberg) -- Basis Capital Fund Management Ltd., the Australian firm that invests in collateralized debt obligations, filed for bankruptcy protection for its Basis Yield Alpha Fund, stoking concern more hedge funds face collapse.
The Sydney-based firm's fund asked a court in the Cayman Islands for permission to liquidate its assets, according to a petition filed in New York yesterday. The George Town, Grand Cayman-based fund has assets and liabilities of more than $100 million, according to the petition, which asked a federal bankruptcy judge to bar lawsuits in the U.S. while it liquidates in the Caymans.
"This report revives concerns over how much deeper the subprime-mortgage losses will be,'' said Masanobu Ishikawa, general manager of foreign exchange at Tokyo Forex & Ueda Harlow Ltd. He said investors will unwind so-called yen carry trades, in which they borrow money in Japan and then buy currencies including the dollar so they can invest in higher-yielding assets in other countries.
The surge in U.S. home-loan payment defaults has forced more than 100 mortgage companies to close, seek bankruptcy protection or put themselves up for sale. Defaults on subprime loans in the first quarter climbed to the highest since 2002, according to the Mortgage Bankers Association. The defaults led investors to shun securities backed by subprime mortgages.
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