Australian Macquarie's bank says it's bond funds down 25%

Discussion in 'Wall St. News' started by makloda, Aug 1, 2007.

  1. Aug. 1 (Bloomberg) -- Macquarie Bank Ltd., Australia's largest securities firm, said investors in two of its high-yield funds may lose 25 percent of their money as a rout in the U.S. sub-prime market spreads.

    Macquarie Fortress Investments Ltd., with $873 million of funds, was forced to sell assets to avoid breaching its loan agreements, the firm said in a statement. The company's stock slumped while shares in its parent Macquarie Bank headed for their biggest drop in five-and-a-half years.

    ``The contagion looks like it's spreading and some of the bigger names are now being dragged in,'' said Shane Oliver, who helps manage the equivalent of $83 billion at AMP Capital Investors in Sydney.

    Funds are being caught in a downward spiral because banks are forcing borrowers to sell assets as the value of collateral declines. Bear Stearns Cos. halted redemptions from a third hedge fund yesterday while Sydney-based Absolute Capital Group Ltd. and Basis Capital Fund Management Ltd. are trying to avoid making sales at distressed prices.

    ``There have been no defaults in the portfolio and no reason to believe that the loans will not continue to pay their interest and repay principal,'' Macquarie Fortress director Peter Lucas said in the statement.

  2. A lot of Australian banks are vulnerable to this. We have our own version of subprime and Alt A.

    We also have at least one interest rate rise coming.

    We have forgotten the lessons of the past.