Bear Stearns (BSC - Cramer's Take - Stockpickr - Rating) is set to offload about $450 million of securities tied to one of its failing hedge funds.
The offering consists of securities from a cash collateralized debt obligation tied to a credit from debt backed by subprime mortgages. The CDO debt list is peppered with fixed- and floating-rate junk debt but includes primarily securities that carry higher-credit quality as rated by Standard & Poor's and Moody's Investors Service.
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It's hard to say how the debt might trade in the market in light of all the distress in subprime, one CDO manager says, noting that previous offerings from Bear have fared "OK." He was unable to provide pricing on past Bear deals.
This could create a big problem. Depending on which bonds Bear is selling, it may be selling very illiquid securities. If this is the case, then bids for the bonds might come in lower than Bear would like. This could lead to a wave of similar debt being written down, which could impact a lot more funds.
