The Wall Street Journal-20080215-Credit Crunch- Standard Chartered Offers Two Plans to Bail Out SIV
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Credit Crunch: Standard Chartered Offers Two Plans to Bail Out SIV
Full Text (457 words)LONDON -- Standard Chartered PLC said it submitted two proposals to rescue its $7.15 billion Whistlejacket structured investment vehicle from receivership, in an effort to protect the interests of clients who invested in the vehicle's debt.
The United Kingdom bank, which does most of its business in Asia, two weeks ago proposed providing a backstop facility on Whistlejacket's senior debt but had to abandon that plan after a fall in the market value of the vehicle's assets forced it into receivership.
SIVs such as Whistlejacket have struggled to raise financing since investors started shunning their IOUs in August, as concerns grew about potential defaults on the mortgage-backed securities that typically make up about a third of SIV portfolios. Most of the vehicles have triggers that kick in if the market value of their assets falls below a certain level, a process that ultimately can lead to receivership.
A Standard Chartered spokesman Thursday said that two plans were submitted late Wednesday to Whistlejacket's receiver, Deloitte & Touche LLP. He said the proposals are designed to protect the interests of both senior and junior debtholders in Whistlejacket.
One option Standard Chartered has proposed to Deloitte is to buy all of the SIV's assets and pay off senior and junior creditors at agreed prices, a person familiar with the matter said. Junior investors would be invited to take so-called "vertical slices" of the assets, which means they could exchange their notes for some of Whistlejacket's underlying assets. The other proposal is similar to the initial plan in that Standard Chartered would put in place a backstop facility on the senior debt. To legally facilitate this plan, all of the assets and liabilities would be moved into a new vehicle.
"We have been approached by various other banks as well as Standard Chartered about a restructuring of Whistlejacket and will consider each proposal on its merits," said Neville Kahn, a partner at Deloitte & Touche who is serving as the vehicle's receiver.
Meanwhile, HSBC Holdings PLC on Thursday said investors in its $26 billion Cullinan SIV agreed to a restructuring plan that could serve as a framework for managers of other troubled SIVs.
Junior noteholders in Cullinan Finance Ltd. will exchange their notes for debt in two new vehicles HSBC has set up. One, called Mazarin Funding Ltd., is a conduit backed by HSBC that will issue asset-backed commercial paper and medium-term notes. The second, Barion Funding Ltd., will have term funding from HSBC for its portfolio of bank debt and asset-backed securities.
Cullinan's senior debtholders will be invited to sell their debt and purchase Mazarin commercial paper and notes. Otherwise, HSBC will repay their debt as it matures and eventually wind down Cullinan.
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Anousha Sakoui contributed to this article.
