JPMorgan Siezes Guggenheim Debt Fund’s Collateral

(Reuters) – JPMorgan Chase & Co (JPM.N: Quote, Profile, Research, Stock Buzz) seized tens of millions of dollars of collateral from a commercial property debt fund run by Guggenheim Partners LLC, the Wall Street Journal said citing people familiar with the matter.

The move followed the fund’s failure to provide additional capital to meet margin calls and JPMorgan started to auction off the seized collateral this week, the paper quoted the people as saying.

Guggenheim Partners’ debt funds have some $8 billion in capital, the paper said.

The short-term debt triggered margin calls in recent weeks as the weakening economy wreaked havoc in the commercial real estate debt market, the paper said.

Under the terms of the debt, a drop in the value of the fund’s collateral led lenders to demand additional cash, according to the paper.

The woes of Guggenheim, which was founded by the philanthropic New York family best known for the Guggenheim museums, follows the forced liquidation of a $1.5 billion real-estate debt fund with investors including the family of one-time presidential candidate H. Ross Perot, the paper said.

JPMorgan, which declined to comment on Guggenheim, has previously said it has taken such actions because they are in the best interest of the bank’s customers and shareholders, the paper said.

Edward Shugrue III, Guggenheim’s head of the debt fund, declined to comment, the paper said.

JPMorgan and Guggenheim Partners could not be immediately reached for a comment by Reuters. (Reporting by Sakthi Prasad in Bangalore; Editing by Jon Loades-Carter)