Yesterday, in the aftermath of the shocking news that the Third Avenue Focused Credit Fund was liquidating and had gated investors due to its "illiquid" portfolio, we had one simple prediction:

"What this means is that now that the dreaded "gates" are back, investors in all other junk bond-focused hedge funds, fearing they too will be gated, will rush to pull what funds they can and submit redemption requests, in the process potentially unleashing a liquidity - and liquidation - scramble within the hedge fund community, which will first impact bonds and then, if the liquidity demands continue, equities as well."

We had to wait just over 24 hours to be proven correct, because moments ago Dow Jones reported that the $1.3 billion Manhattan-based Stone Lion Capital, a distress-focused hedge fund, has just suspended redemptions after "substantial requests."

The WSJ adds:

It is the latest example of the sudden crunch facing traders across Wall Street looking to sell beaten-down positions. Stone Lion manages around $1.3 billion and specializes in distressed debt and other risky investments that have plunged in value lately. It received “substantial redemption requests” in its oldest hedge fund, the $400 million Stone Lion Portfolio LP, precipitating the decision, the firm said.

At least the had a pretty logo:







The management team via CapIQ:

And here is the punchline:

Alan Jay Mintz, CPA, a co-founder of Stone Lion Capital was Co-Head of the Distressed Debt and High Yield trading group at Bear Stearns

Gregory Augustine Hanley, a co-founder of Stone Lion Capital was Co-Head of the Distressed Debt and High Yield trading group at Bear Stearns

One really couldn't make this up.