Hedge funds closing over subprime issues

Two Bear Stearns Cos. hedge funds that invested heavily in securities backed by subprime mortgage loans are close to being shut down as a rescue plan is falling apart, The Wall Street Journal Online reported on Wednesday.

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Merrill Lynch & Co., one of the hedge funds’ lenders, will move to seize collateral from the two funds and sell it, the Journal reported, citing unspecified documents.

Neither Merrill nor Bear Stearns were immediately available to comment on the report.

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The struggling Bear Stearns High-Grade Structured Credit Strategies Enhanced Leverage Fund suffered 23 percent losses through April, amid money-losing investments in subprime mortgages, and faced demands from creditors to post additional collateral.

Late last week, the fund sold off at least $4 billion of mortgage securities, to help pay for client redemptions and expected margin calls.