Bear Stearns offers $1.5 bln for troubled fund

NEW YORK (Reuters) - Bear Stearns Cos. BSC.N has offered to infuse $1.5 billion of its own capital to help rescue a Bear Stearns hedge fund on the brink of collapse, people familiar with the situation said on Tuesday.

Negotiations to rescue the fund are continuing, and the situation is still fluid, a person familiar with the matter said.

The fund would pledge collateral against the $1.5 billion from Bear Stearns, sources said.

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.

Soon after that, Merrill Lynch MER.N seized some $400 million of the funds' assets, and planned to sell them off, according to news reports.

But instead, creditors including Merrill, Citigroup (C.N), and JPMorgan Chase (JPM.N) agreed to discuss a reorganization for the fund.

On Tuesday, Blackstone Group presented creditors with a plan to keep the fund going, including a capital infusion and a year-long freeze on collateral calls.

Blackstone BG.UL, the private-equity investment giant that is also an active restructuring adviser, Merrill, and JPMorgan declined to comment. Representatives of Citigroup and Bear Stearns did not return calls seeking comment.

Bear Stearns has about $40 million of exposure to the fund, and executives last week said the fund's struggles would not affect its earnings.

(Reporting by Walden Siew, Joseph Giannone, Dan Wilchins)