Lewis buys 7% Bear Stearns stake

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Billionaire British investor Joseph Lewis has spent about $860m (£424m) buying a 7% stake in struggling US investment bank Bear Stearns.

The move is seen as a major boost for Bear Stearns, which has been one of the firms most affected by the crisis in the US sub-prime mortgage sector.

Bear Stearns had to spend $1.6bn in June to bail out two of its funds exposed to sub-prime defaults.

The firm's then co-president Warren Spector resigned at the time.

Largest investor

Mr Lewis has bought the shares over the past two months through his Florida-based investment firm Tavistock, according to a filing to the US financial watchdog, the Securities and Exchange Commission.

It makes him Bear Stearns' largest individual investor.

The 16th richest British person according to this year's Sunday Times Rich List, he is worth an estimated £1.2bn.

Having made most of his fortune in the currency markets, the reclusive Mr Lewis now lives in the Bahamas.

His other investments include minority stakes in Tottenham Hotspur and Glasgow Rangers football clubs.

Record defaults

The US sub-prime mortgage sector concerns higher risk loans to people with poor credit histories or those on low incomes.

Higher mortgage rates over the past year have meant record levels of defaults in the industry.

The result has not only been significant financial difficulty for banks and investment firms heavily exposed to the sub-prime market, but also the recent stock market turmoil.

This is because of fears that the crunch in the sub-prime sector will spread to the wider loans market as banks become far more cautious about whom they lend to.

The situation has been exacerbated by the fact that sub-prime debt is often resold as part of a wider debt package, meaning that banks and investors are, as yet, unsure about how far the sub-prime downturn could spread.

As a result, banks are also holding back funds to cover any sub-prime liabilities they themselves may face.