Standard Chartered abandoned plans to support its SIV, which is already in receivership. It is likely to default on its February 15 payment (it has three business days to cure the default).
While this development is not expected to hurt either the bank or the marketplace, it’s another indicator that some institutions are less concerned than in the past about preserving their reputation.
Standard Chartered on Wednesday dropped initial rescue plans for its $7 billion Whistlejacket structured investment vehicle which was forced into receivership last week, drawing criticism from analysts.
Asia-focused bank Standard Chartered said its decision to drop the plans was the result of a number of factors including “the pace of continuing deterioration in the market for certain asset classes”.
Receivers Deloitte said they were continuing to work on a potential restructuring and emphasized that a fire sale of Whistlejacket’s assets was not under consideration.
Other banks have stepped in successfully to rescue their SIVs, which raise short-term debt and invest the proceeds in longer-term securities.
Business walking away from deals, and consumers walking away from debt. It’s a recipe for disaster unfolding right before our eyes.
let’s not get too dramatic here. it’s just business. in a few years when everyone is greedy again, past reputational issues will be forgotten. i remember in ’98 when russia defaulted on its debt some rocket scientist hedge fund manager was quoted in the journal as saying russian securities are toxic waste that no one would ever buy again. look at the market today.
in a few years standard will offer another new product with a sexy yield and investors will pile in. no one will remember this. it’s not right, but such is the nature of the business and investor.
i agree that in the short term, things may ouch.
KRunched Financial Holdings
Talk about obfuscation. From KKR Financial Holdings, filed with the SEC late on Tuesday:
On February 15, 2008, KKR Financial Holdings LLC (the “Company”) entered into an Extension Amendment Agreement (the “Amendment Agreement”) with the holders of non-recourse secured liquidity notes (the “SLNs”) issued by two asset-backed secured liquidity note conduit facilities (the “Facilities”) to allow for restructuring discussions. On October 18, 2007,
Back in the summer KFH had more than $5bn of mortgages financed by short term commercial paper. Since then that seems to have mutated into a $7.6bn portfolio of corporate debt. (Yes, after the residential property blow up it moved into leveraged loans.) We can assume that unwinding all that on a fire sale basis will hurt – and yet KFH was busy declaring a dividend (of 50 cents) to shareholders just three weeks ago
It’s the beginning of the end for some.