Cheyne assets disappoint in rescue auction

The auction of the first portion of assets in SIV Portfolio, formerly known as Cheyne Finance, took place this week, but the assets sold at just 44% of par value - well below analyst predictions.

This is the first step in a restructuring of the failed vehicle, and the auction will be settled on July 22. The structured investment vehicle (SIV) invested in residential mortgage-backed securities (61% of the portfolio), and collateralised debt obligations of asset-backed securities made up 7% of the portfolio.

The renamed SIV's restructuring is being handled by Goldman Sachs and the receivers, Deloitte & Touche. On July 15 Moody's downgraded the medium-term note tranches of debt to Ca from B2. That rating itself was a result of a downgrade in November last year, when the agency assumed the structure would hold assets to maturity.

Under the restructuring proposal, 30% of the SIV's assets would be sold at auction to establish the market value at which the remainder of the portfolio could be disposed of. Moody's estimated that the average portfolio price of the assets in the vehicle was at 62.94% of par as of July 4.

In the event, Deloitte received bids from 11 alternative bidders on July 16, and the price achieved was 44% of par, with four successful bidders.

"The remainder of the investment portfolio will be sold to Goldman Sachs International at the same percentage price that the company receives for the sale of the portion of the investment portfolio pursuant to the auction process," said a filing from the vehicle on the Irish Stock Exchange Regulatory News Service.

That transfer is expected to take place on July 23. Goldman will then transfer the remaining assets to a new special purpose vehicle, which will issue new securities, according to Moody's.

See also: Cheyne auction reflects harsh reality for SIVs

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