has bagged buyers for some $3.8 billion worth of mortgage debt it held via a hedge fund the financial institution manages.
has learned that the debt package, consisting of hundreds of loans, mostly tied to Alt-A borrowers and other types of mortgages, were auctioned at about 10 a.m. to a wide array of investors.
Buyers included other unidentified hedge funds and managers of collateralized debt obligations who saw an opportunity to buy the mortgages and possibly repackage them for sale as structured securities, according to a CDO manager who opted to take a pass on the Bear Stearns offering.
A call to a spokesman for Bear Stearns was not immediately returned.
Buyers of the packages could not be identified nor could prices offered for the individual debt, which varied in size from $1 million to $110 million, according to
The Wall Street Journal
Bear Stearns, the second biggest underwriter of mortgage securities, is offloading the mortgage portfolio because of bad bets in the mortgage market, which has tumbled largely due to troubles with loans made to borrowers with poor credit.
"They just leveraged an asset class that was repricing," a trader said. Subprime loans made up just about 5% to 10% of the mortgage offering, the trader said.
The mortgage market, which has been a strong suit for Bear in the past, caused it considerable pain on its bottom line in the latest quarter reported Thursday.
Bear Stearns made $362 million in the second quarter, or $2.52 a share, down from the year-ago $539 million. Operating earnings, excluding certain costs, were $3.40 a share. Analysts were expecting the firm to make $3.50 a share on $2.3 billion of net revenue.
Revenue at its principal trading business slumped 18% to $1.2 billion. The firm's capital markets business fell 10% to $1.9 billion.
Revenue at Bears Stearns' fixed-income unit dropped 21% from a year earlier to $962 million. Bear said in a statement that mortgage-related revenue "reflected both industry wide declines in residential mortgage origination and securitization volumes and challenging market conditions in the sub-prime and Alt-A mortgage spaces."
Bear Stearns' shares have been up and down today. In afternoon trading, the stock was up a quarter to $149.74.