Standard Chartered has taken a second vertical slice of its Whistlejacket structured investment vehicle (SIV) and will consolidate the whole $7 billion structure onto its balance sheet, the bank announced today.Standard Chartered first acted to support Whistlejacket in November, when it exchanged $140 million of the SIV's capital notes for a $1.68 billion vertical slice of its assets – a move that cost it a $46 million bottom-line cost. It subsequently took a second vertical slice, worth $1.65 billion, in exchange for $143 million of capital notes - costing it a further $70 million in reduced earnings.
The bank now says it will take the SIV's remaining $7.15 billion in assets onto its own balance sheet, and will continue to fund the vehicle through a commercial paper facility up to the full $7.15 billion.
Since the start of the credit crisis, Whistlejacket has hit funding problems - like other SIVs, it found it almost impossible to continue to fund itself by issuing short-term commercial paper. Whistlejacket has been raising funds instead by selling assets and using repo agreements, the bank said. Its portfolio has fallen from $18.2 billion in August to $10.8 billion in November and $7.2 billion at present.
Of this, 51% is asset-backed securities (ABS), chiefly based on high-rated auto and credit card debt, and 5% is collateralised debt obligations of ABS, of which "a small amount" is linked to US subprime mortgages, Standard Chartered said. Ninety-five per cent are rated Aa3 or higher.
The SIV still has $1.5 billion in third-party liquidity arrangements in place, but this cannot be drawn on until the SIV goes into liquidation, the bank said.
Rating agency Moody's said the move would not affect Standard Chartered's financial stability or its A2 credit rating.
See also: SIV pain resurfaces through ratings
Topics: Standard Chartered Bank
More on Structured Products
Controversial tax reforms would foist “unworkable” compliance burdens on firms
Product aims to improve on PowerShares S&P 500 Low Volatility Portfolio ETF using risk reduction
Conditional income product offers steady income and could offset potential bear market losses
Product offers 17% maximum return but investors’ capital is protected
Sign up for Risk.net email alerts
Sanjay Sharma talks about risk transparency and how his book helps achieve it.
A five-minute formula from Alexander Denev that takes you through a simple probabilistic graphical model and explains how and why these are used. Find out more about the ground-breaking book, Probabilistic...
Industry leader Vincent Kaminski discusses the challenges faced by energy markets and his new book, Managing Energy Price Risk, 4th Edition.
Momtchil Pojarliev talks about his book, The Role of Currency in Institutional Portolios, currency investing and the potential role of currencies in institutional portfolios.
There are no comments submitted yet. Do you have an interesting opinion? Then be the first to post a comment.