Reserve Primary May Only be a Penny Short
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Wednesday, August 26, 2009

Reserve Primary May Only be a Penny Short

Shareholders in the Reserve Primary Fund may not face as large a loss as they initially feared. The New York City fund firm said Tuesday that shareholders will likely be paid out $0.9875 per share and could receive as much as $0.99 per share.

For the full story on the the death of the Reserve and its Primary Fund, see MFWire's timeline.

The Reserve (now rebranded as Double Rock) filed the calculations as a part of a brief to the U.S. District Court for the Southern District of New York that is overseeing the fund's liquidation.

Executives at The Reserve also said that the fund and its independent trustees "unequivocally support the distribution of the Fund's remaining assets on a fair and equitable basis as quickly as possible."

In an earlier estimate, the Reserve had pegged the final payout to fund shareholders at $0.985 per share.

The updated payout estimates are based on analysis from Cornerstone Research, which was hired by the independent trustees to crunch the numbers.

In the case of the highest payout of $0.99 per share, Cornerstone estimated that the Lehman Bros paper held in the fund fetches $0.17 on the dollar. It also assumed a special reserve fund could be reduced to $90 million if the court allows the SEC's plan of distribution.

The more pessimistic estimate assumes no value to the Lehman paper.

The fund continues to hold $4.55 billion of assets. The board has also set aside $3.5 billion in a special reserve to satisfy possible legal, accounting and other expenses, including claims for indemnification that could be made against Fund assets as a result of pending shareholder claims against the fund, its officers and Trustees.

To date, the fund has made four distributions totaling $46.08 billion.

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