MutualFundWire.com
The insiders' edge for 40 Act industry executives!
an InvestmentWires' Publication
an InvestmentWires' Publication
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MutualFundWire.com
The insiders' edge for 40 Act industry executives!
an InvestmentWires' Publication |
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Wednesday, October 17, 2012 Five Bidders Offered Up to $625MM for Reserve, Pre-Lehman Less than a year before the collapse of the Reserve's flagship Primary Fund, five bidders were willing to pony up as much as $625 million for the New York City-based mutual fund shop. That detail came to light this morning in the SEC's fraud trial against Reserve and the Bent family in charge. To read the full, continuing saga of the collapse of the Reserve Primary Fund and the ensuing legal battle, see MFWire's living timeline. Reserve scion Bruce Bent II returned to the witness stand this morning for cross-examination by the defense. He revealed a document from Credit Suisse, the Reserve's investment bank, which listed five bidders for the business, with offers ranging in value from $90 million all the way to $625 million. Bent II said that the investment bank provided the document around January 2008, eight months before the collapse of Lehman Brothers killed Reserve's flagship fund. Bent II and his father, Reserve co-founder and money fund co-creator Bruce Bent Sr., decided to pass. "Some of the bids, we thought, were just too low," Bent II said. "On the higher end, they wanted us to continue to run the business." Bent II also continued his account of the events of that fateful September week, calling it a "harrowing" experience. From Sunday, September 14, 2008 through Tuesday, September 16, 2008, when Primary broke the buck, Bent II said that he received and made more than 1,000 e-mails and calls. "I was on the phone almost constantly, sometimes on two or three calls at once," Bent II said. "It was exhausted." Bent II also revealed, in the minds of himself and others at the Reserve, they did not expect the entirety of their $785 million in Lehman debt holdings to be rendered worthless by the bankruptcy. In fact, according to the Chapter 11 bankruptcy filing documents sent to Bent II on the morning of the 15th, Lehman had $639 billion in assets and $613 billion in liabilities, an excess of $26 billion. They expected bondholders like themselves would get their money back. "Bankruptcy doesn't mean that something's worthless," Bent II said. "I never imagined in my worst nightmare that I'd have to come up with $785 million." Bent II confirmed that, at the time of the Lehman collapse, Reserve had about $50 million in cash on hand, with more than half of that invested in the Primary Fund itself. Despite expecting to receive their $785 million in full from Lehman, Bent II made preparations for Reserve to prop up Primary if need be, perhaps with $10 million to start. "I was still doing all the things I needed to do to put a credit support agreement in place," Bent II said, noting that selling the company was a top option for funding such support. "I still had to deal with whatever the trustees marked it to." "That [the $10 million] was not a limit. It was a starting place," Bent II added. "If we needed more we had the option to put in more." Printed from: MFWire.com/story.asp?s=41690 Copyright 2012, InvestmentWires, Inc. All Rights Reserved |