Bear Stearns hedge fund liquidators appeal foreign case recognition denial

By Caroline Salls

Pittsburgh, Sept. 10 - Bear Stearns High-Grade Structured Credit Strategies Master Fund, Ltd. and Bear Stearns High-Grade Structured Credit Strategies Enhanced Leverage Master Fund, Ltd.'s provisional liquidators have appealed a ruling denying recognition of their Cayman Islands bankruptcy proceedings, according to a Monday filing with the U.S. Bankruptcy Court for the Southern District of New York.

As previously reported, Judge Burton R. Lifland ruled that the Bear Stearns hedge funds cannot proceed with their Chapter 15 cases because their Cayman Islands proceedings were not recognized as foreign main proceedings.

Instead, Lifland said the funds need to file an involuntary Chapter 7 or involuntary Chapter 11 case to ensure their U.S. assets are protected.

Lifland extended the funds' preliminary injunction granted Aug. 9 to protect its assets for 30 more days to give them the opportunity to file a Chapter 7 or Chapter 11 case.

Lifland denied the fund liquidators' motion to recognize the funds' Cayman Islands cases as foreign main proceedings because they "are not pending in a country where the funds have their [center of main interests] or where they have an establishment."

"The only adhesive connection with the Cayman Islands that the funds have is the fact that they are registered there," Lifland said in his ruling.

According to the ruling, the funds have no employees or managers in the Cayman Islands, their investment manager is located in New York, and the administrator that runs their "back-office operations" is in the United States, along with the funds' books and records.

Also, Lifland said before the Cayman Islands bankruptcy proceedings were filed, all of the funds' liquid assets were located in the United States.

The Bear Stearns hedge funds filed for bankruptcy on Aug. 1. The Chapter 15 case number is 07-12383.

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