Rabobank has agreed to take the assets of Tango Finance, a structured investment vehicle (SIV) it sponsors, on to its balance sheet. The Dutch bank plans to do this in early 2008 to prevent a potential fire sale of the SIV’s high-quality assets.Tango, in common with all SIVs, has faced funding challenges in recent months. Despite market conditions, it has funded itself successfully until late January 2008 through a combination of asset sales, repo transactions and allowing income note investors to redeem income notes in exchange for buying portfolios of assets.
As a result, Tango now has €5.2 billion in cash assets, down from €9.7 billion in July. The Tango portfolio has only minimal exposure to collateralised debt obligations of asset-backed securities (CDOs of ABSs) and US subprime mortgages, Rabobank said.
“Rabobank plans to take the assets of Tango on to its balance sheet. This will have no material effect on our strong solvency position given the size of the portfolio and the high quality of the assets,” said Sipko Schat, a member of the executive board of Rabobank in Utrecht.
Rabobank believes there is no immediate prospect of the funding situation for SIVs improving in 2008.
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