The mortality rate from the subprime flu seems to be climbing. Basis Capital gave up the ghost this morning. “Basis Capital Fund Management Ltd., the Australian firm that said losses in its Basis Yield Alpha Fund could exceed 80 percent, filed for bankruptcy protection for the hedge fund, citing defaults in US subprime mortgages,” Bloomberg reports.
Back in May, before this whole mess started, basis had US$1 billion in assets. Poof! Gone. “The Sydney-based firm’s Basis fund asked a court in the Cayman Islands yesterday for permission to liquidate its assets, according to a petition filed in New York today. The George Town, Grand Cayman-based fund has assets and liabilities of more than $100 million.”
The Aussie stock market is still sorting out who has subprime risk. There is the direct kind of risk, owning assets backed by American mortgages. And there is indirect risk, owning assets that depend on a healthy American consumer. Take Westfield. Today’s Australian reports that Westfield earned 40% of its first-half profit from 16 shopping centres in the US. And it’s buying more! “Earlier this month Westfield bought two malls in the high-growth state of Florida for US$400 million ($489 million) and sold four in St Louis for US$1.04 billion.”
Parts of Florida are ground zero for the collapse of the mortgage bubble. And when you understand that the mortgage bubble is tied directly to the growth in consumer spending, well then owning retail assets in the vicinity of America’s housing bust…is a risk.
Markets and Money