After a full day of negotiations, creditors have cobbled together a plan to save Bear Stearns' troubled subprime mortgage fund from liquidation, CNBC's Charles Gasparino reported. It includes a major infusion of capital around $500 million into the fund from a group of firms, including Citigroup and Barclays Bank, people tell CNBC. That money will be used to meet future margin calls.
In addition, Bear Stearns has agreed to put its own money into the fund, about $1.5 billion. Bear had only invested around $40 million of company money and from its executives.
The cornerstone of the plan is a commitment by the creditors not to make margin calls on the fund for the next year.
Sources say the plan has yet to be approved by all the creditors and a final decision could be made later tonight or early tomorrow morning. The plan may also ultimately be rejected by the creditors, which means that the fund could be liquidated in the coming days.
CNBC was first to report earlier today that one of the fund's creditors, Merrill Lynch , postponed seizing some $400 million in the fund's assets and selling them after Bear Stearns informed the big investment bank that it had come up with a plan to recapitalize the troubled hedge fund. That sparked a full day of negotiations among the fund's top creditors, which was described as a last ditch effort to prevent liquidation.