Basis Capital has called in private equity Blackstone Group to negotiate with investment banks in the wake of the group's exposure to US sub-prime assets and CDOs.
According to the beleaguered groups latest communication to investors, Blackstone role will be to, "prevent adverse pricing and selling of assets, as well as add to the international experience of the funds' investment management and advisory teams."
Blackstone Group will act as financial advisor to both the Basis Yield Alpha and Basis Pac-Rim Opportunity Funds.
Blackstone recently took on a similar advisory role at the US's fifth-largest securities firm, Bear Stearns Asset Management, where two funds running structured credit strategies failed following investments in US sub-prime mortgages that went the wrong way.
According to the Basis release, one of Bear Stearns' Sub-Prime Asset Investment Funds had attracted $638 million from investors and was geared up more than 10 times.
According to Basis, it had leverage of less than two times on its combined portfolios.
In a letter to its investors sent on July 11, Basis advised that last month its two funds, the Basis Yield Fund and Basis Aust-Rim Opportunity Fund, had lost around 14 per cent and 9 per cent respectively.
Basis said the falls took place after bond dealers suddenly marked down the value of the securities, which it said were otherwise fundamentally sound.
Both Morningstar and Standard & Poor's have placed the Basis funds on hold.
Blackstone, with its headquarters in New York, manages around $88.4 billion in total assets, and has offices in Atlanta, Boston, Chicago, Dallas, Los Angeles, San Francisco, London, Paris, Mumbai and Hong Kong.
Private equity firms like Blackstone Group buy public companies, leverage them up with debt and later sell them at a profit.
