NEW YORK (Reuters) - Two Bear Stearns Cos. hedge funds that invested heavily in securities backed by subprime mortgage loans are close to being shut down as a rescue plan is falling apart, The Wall Street Journal Online reported on Wednesday.

Merrill Lynch & Co., one of the hedge funds' lenders, will move to seize collateral from the two funds and sell it, the Journal reported, citing unspecified documents.

Neither Merrill nor Bear Stearns were immediately available to comment on the report.