DBRS has confirmed all ratings for The Bear Stearns Companies Inc. following the news that it will finance a failing hedge fund up to $3.2 billion.

The secured financing is in the form of repurchase agreements to a hedge fund managed by Bear Stearns Asset Management. The High-Grade Structured Credit Strategies Fund managed by BSAM has experienced margin calls and investor redemption requests due to losses in collateralized debt obligations and other structured securities it holds. By offering the secured financing, Bear aims to stabilize the High-Grade Fund, improve its liquidity and facilitate an orderly deleveraging of the fund, DBRS notes.

The rating agency adds that the company has not offered to extend financing to a second hedge fund managed by BSAM, the High-Grade Structured Credit Strategies Enhanced Leverage Fund, which has also experienced redemption requests and margin calls triggered by losses. “The company continues to work with creditors of the Enhanced Fund to reduce leverage in an orderly manner and improve liquidity,” it says.

In DBRS’s view, Bear’s actions balance the benefit to the High-Grade Fund and BSAM from a more orderly de-leveraging against the additional risk incurred by Bear in providing the financing. “Given the nature of these actions, DBRS expects the impact of these actions on the company to be limited,” it says, adding that it has confirmed the positive trend of the company’s long-term ratings.

“DBRS will continue to monitor the evolving market environment and its potential impact on collateral values, as well as any fall-out from the hedge fund issues on BSAM’s and the company’s businesses,” it says. “DBRS views Bear’s risk exposure through the financing offer as manageable, given its strong liquidity and sufficient capital resources.” It also notes that the financing is collateralized, limiting its risk of loss even in a severe stress scenario. “Also, it is unlikely that the full $3.2 billion in financing offered will be drawn, further limiting Bear’s exposure,” it says.

Bear’s ratings and the Positive trend are underpinned by its resilient earnings power and business diversification, the rating agency says. “Many of the company’s businesses continue to perform strongly, although Bear’s mortgage businesses currently face a difficult environment.”