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[greenie]

http://marcambinder....everquest_1.php
"An unprecedented attempt by a Wall Street house to dump its mortgage bets."



Full news below:

http://www.marketwat.....8206FF1742E0}



Everquest IPO tied to troubled Bear hedge fund
Cioffi's fund transferred risky mortgage derivatives to firm he helps run
By Alistair Barr, MarketWatch
Last Update: 1:18 PM ET Jun 15, 2007

SAN FRANCISCO (MarketWatch) -- Everquest Financial, a company that filed plans for an initial public offering last month, has ties with a troubled hedge fund run by investment bank Bear Stearns Cos.
The High-Grade Structured Credit Strategies Enhanced Leverage Fund, run by Bear mortgage veteran Ralph Cioffi, sold roughly $4 billion of subprime mortgage-backed securities on Thursday.
The fund slumped 23% in the first four months of 2007, according to The Wall Street Journal. It was probably selling its highest-rated and most heavily traded securities first to raise cash to meet redemption requests and possible margin calls, hedge-fund investors and bond-market traders said on Thursday. See full story.
The hedge fund, as well as another run by Cioffi called the Bear Stearns High Grade Structured Credit Strategies Fund, transferred riskier parts of collateralized debt obligations, or CDOs, that they owned to Everquest when the company was being set up last year, according to the company's IPO filing with the Securities and Exchange Commission.
In return, the Bear Stearns hedge funds got a large stake in Everquest and nearly $150 million in cash, the filing said.
In addition to running the Bear Stearns hedge funds, Cioffi is co-chief executive of New York-based Everquest, the filing noted.
"If the stories are correct about the problems at the fund, it sounds like they off-loaded the riskiest positions to Everquest," said Josh Rosner, a managing director at research firm Graham Fisher & Co.
"It is not clear if this was before or after they were aware that those positions were hurting the hedge fund, but the decision seems to have happened before news leaked of the funds' supposed problems," he added.
"Everquest is in a registration process with the SEC, so there's nothing I can say about it," said Elizabeth Ventura, a Bear Stearns (BSC :
The Bear Stearns Companies Inc
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BSC150.09, +0.49, +0.3% ) spokeswoman, on Friday. Another spokeswoman at the bank said Cioffi was unavailable for comment.
CDOs are a bit like mutual funds, but they usually buy securities that are backed by loans. These complex structures helped fuel the U.S. mortgage boom in recent years by purchasing some of the riskier parts of mortgage-backed securities that other investors didn't want.
CDOs are sliced up into different "tranches." The highest-rated parts get cash flows from the underlying assets first and are last to be hit by any losses. The riskiest bits, known as equity tranches, represent the first loss position in a CDO and get paid after the other parts receive cash. Reflecting these different risks, CDO equity tranches offer much higher yields than the highest-rated parts.
The Bear hedge funds transferred mostly equity and "mezzanine" tranches of CDOs to Everquest. Mezzanines are subordinate to the highest-rated parts of CDOs, but they're rated higher than equity tranches, which are typically unrated.
At the end of 2006, Everquest had more than a third of its assets in CDO equity tranches. During the first quarter, the company bought equity tranches in three more CDOs for $32.9 million, according to its IPO filing.
Many of those CDOs have invested in mortgage-backed securities backed by subprime home loans, Everquest also noted in the filing.
The transfer of the CDO tranches to Everquest was not negotiated at arm's length and the price the company paid for the assets may be higher than what the Bear hedge funds could have gotten for them from other investors, the company explained in its filing.
Everquest also warned that there's no liquid public market for CDO equity tranches, so the assets are difficult to value. Such valuations depend on management assumptions about future cash flows that are "highly subjective."
"When we get to CDO exposures, these are relatively illiquid and not very transparent. So other than a ratings downgrade or sale of a security, you are largely valuing portfolios to models," Rosner said.
"By the time the cycle unwinds, we will have seen some very interesting marks across" Wall Street, he added. "This is the problem with large illiquid trades. Marks in the CDO market are generally subject to significant management judgment until they are actually traded."
Rosner also wondered whether Everquest's exposure to CDOs backed by subprime mortgages is appropriate for retail investors.
"Everquest is an opportunity for retail investors to own managed CDO exposures to equity tranches -- the first loss pieces," he said. "Only qualified institutional buyers can invest in CDOs, so it is interesting that the SEC is allowing the sale of shares in this company to retail investors."
Rosner co-authored a study earlier this year on how rising delinquencies and foreclosures in the subprime mortgage market could hurt some CDOs. See full story.
Everquest has hedged some of these risks. In its IPO filing, the company said that the Bear hedge funds transferred credit default swaps on May 8 that offer protection against default on 48 tranches of asset-backed securities held by its CDOs.
Credit default swaps mainly focus on subprime mortgage-backed securities. Those hedges may not cover all the risks involved, Everquest added.
Everquest also noted potential conflicts between the interests of Cioffi and his hedge funds and the interests of future Everquest shareholders. The company said it plans to resolve those conflicts by requiring that its managers "act in a manner that they consider fair and equitable in the allocation of business opportunities," according to the IPO filing.
Certain transactions involving Everquest's managers must also be approved by "disinterested" directors on the company's board, Everquest explained.
Everquest also said that the interests of the company and the Bear Stearns hedge funds are strongly aligned. The funds owned roughly 67% of Everquest's ordinary shares at the end of 2006, the company noted in its filing. End of Story
Alistair Barr is a reporter for MarketWatch in San Francisco.

[Tor]

http://marcambinder....everquest_1.php
"An unprecedented attempt by a Wall Street house to dump its mortgage bets."



Full news below:

http://www.marketwat.....8206FF1742E0}



Everquest IPO tied to troubled Bear hedge fund
Cioffi's fund transferred risky mortgage derivatives to firm he helps run
By Alistair Barr, MarketWatch
Last Update: 1:18 PM ET Jun 15, 2007

SAN FRANCISCO (MarketWatch) -- Everquest Financial, a company that filed plans for an initial public offering last month, has ties with a troubled hedge fund run by investment bank Bear Stearns Cos.
The High-Grade Structured Credit Strategies Enhanced Leverage Fund, run by Bear mortgage veteran Ralph Cioffi, sold roughly $4 billion of subprime mortgage-backed securities on Thursday.
The fund slumped 23% in the first four months of 2007, according to The Wall Street Journal. It was probably selling its highest-rated and most heavily traded securities first to raise cash to meet redemption requests and possible margin calls, hedge-fund investors and bond-market traders said on Thursday. See full story.
The hedge fund, as well as another run by Cioffi called the Bear Stearns High Grade Structured Credit Strategies Fund, transferred riskier parts of collateralized debt obligations, or CDOs, that they owned to Everquest when the company was being set up last year, according to the company's IPO filing with the Securities and Exchange Commission.
In return, the Bear Stearns hedge funds got a large stake in Everquest and nearly $150 million in cash, the filing said.
In addition to running the Bear Stearns hedge funds, Cioffi is co-chief executive of New York-based Everquest, the filing noted.
"If the stories are correct about the problems at the fund, it sounds like they off-loaded the riskiest positions to Everquest," said Josh Rosner, a managing director at research firm Graham Fisher & Co.
"It is not clear if this was before or after they were aware that those positions were hurting the hedge fund, but the decision seems to have happened before news leaked of the funds' supposed problems," he added.
"Everquest is in a registration process with the SEC, so there's nothing I can say about it," said Elizabeth Ventura, a Bear Stearns (BSC :
The Bear Stearns Companies Inc
News , chart , profile , more
Last: 150.09+0.49+0.33%
6:41pm 06/15/2007
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Sponsored by:
BSC150.09, +0.49, +0.3% ) spokeswoman, on Friday. Another spokeswoman at the bank said Cioffi was unavailable for comment.
CDOs are a bit like mutual funds, but they usually buy securities that are backed by loans. These complex structures helped fuel the U.S. mortgage boom in recent years by purchasing some of the riskier parts of mortgage-backed securities that other investors didn't want.
CDOs are sliced up into different "tranches." The highest-rated parts get cash flows from the underlying assets first and are last to be hit by any losses. The riskiest bits, known as equity tranches, represent the first loss position in a CDO and get paid after the other parts receive cash. Reflecting these different risks, CDO equity tranches offer much higher yields than the highest-rated parts.
The Bear hedge funds transferred mostly equity and "mezzanine" tranches of CDOs to Everquest. Mezzanines are subordinate to the highest-rated parts of CDOs, but they're rated higher than equity tranches, which are typically unrated.
At the end of 2006, Everquest had more than a third of its assets in CDO equity tranches. During the first quarter, the company bought equity tranches in three more CDOs for $32.9 million, according to its IPO filing.
Many of those CDOs have invested in mortgage-backed securities backed by subprime home loans, Everquest also noted in the filing.
The transfer of the CDO tranches to Everquest was not negotiated at arm's length and the price the company paid for the assets may be higher than what the Bear hedge funds could have gotten for them from other investors, the company explained in its filing.
Everquest also warned that there's no liquid public market for CDO equity tranches, so the assets are difficult to value. Such valuations depend on management assumptions about future cash flows that are "highly subjective."
"When we get to CDO exposures, these are relatively illiquid and not very transparent. So other than a ratings downgrade or sale of a security, you are largely valuing portfolios to models," Rosner said.
"By the time the cycle unwinds, we will have seen some very interesting marks across" Wall Street, he added. "This is the problem with large illiquid trades. Marks in the CDO market are generally subject to significant management judgment until they are actually traded."
Rosner also wondered whether Everquest's exposure to CDOs backed by subprime mortgages is appropriate for retail investors.
"Everquest is an opportunity for retail investors to own managed CDO exposures to equity tranches -- the first loss pieces," he said. "Only qualified institutional buyers can invest in CDOs, so it is interesting that the SEC is allowing the sale of shares in this company to retail investors."
Rosner co-authored a study earlier this year on how rising delinquencies and foreclosures in the subprime mortgage market could hurt some CDOs. See full story.
Everquest has hedged some of these risks. In its IPO filing, the company said that the Bear hedge funds transferred credit default swaps on May 8 that offer protection against default on 48 tranches of asset-backed securities held by its CDOs.
Credit default swaps mainly focus on subprime mortgage-backed securities. Those hedges may not cover all the risks involved, Everquest added.
Everquest also noted potential conflicts between the interests of Cioffi and his hedge funds and the interests of future Everquest shareholders. The company said it plans to resolve those conflicts by requiring that its managers "act in a manner that they consider fair and equitable in the allocation of business opportunities," according to the IPO filing.
Certain transactions involving Everquest's managers must also be approved by "disinterested" directors on the company's board, Everquest explained.
Everquest also said that the interests of the company and the Bear Stearns hedge funds are strongly aligned. The funds owned roughly 67% of Everquest's ordinary shares at the end of 2006, the company noted in its filing. End of Story
Alistair Barr is a reporter for MarketWatch in San Francisco.

No one cares any more even if it were true or not as the case may be.

[jawndissedi]

No one cares any more even if it were true or not as the case may be.

Is that so?
Bear Stearns already is reeling from a six-month shakeout in the market for subprime mortgages, loans made to borrowers with bad credit or burdensome debts. Shares of Bear Stearns have dropped 7.8 percent this year, the worst performance in the Amex Securities Broker/Dealer Index

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