Standard Chartered's Whistlejacket SIV May Default (Update1)
By Neil Unmack
Feb. 18 (Bloomberg) -- Standard Chartered Plc's $7.15 billion structured investment vehicle may default this week after failing to repay maturing debt, Standard & Poor's said.
Whistlejacket Capital Ltd. would become the sixth SIV to fail on its debt obligations after defaults by funds including Axon Financial Funding Ltd., Victoria Finance Ltd., Cheyne Finance PLC and Rhinebridge LLC. SIVs have defaulted on more than $27 billion of senior debt since October, according to S&P data.
SIVs, funds that use short-term borrowing to buy longer- dated assets, are collapsing because they're unable to attract investors recoiling from securities that package mortgages and other assets. Banks led by HSBC Holdings Plc and Citigroup Inc. have stepped in to support their SIVs after the collapse of the U.S. subprime mortgage market.
Deloitte & Touche LLP, the receiver appointed last week to oversee the winding down of Whistlejacket, didn't pay notes due Feb. 15, S&P said in a statement. The SIV will be in default if it doesn't make a payment by Feb. 21 when a three-day grace period ends, the ratings company said last week.
U.K. Channel Islands-based Whistlejacket appointed receivers after a decline in the value of its holdings triggered rules forcing it to wind down and prompted London-based Standard Chartered to abandon its proposed bailout. Standard Chartered is pursuing a reorganization of the SIV, S&P said, citing information from Deloitte.
S&P cut Whistlejacket's senior medium-term debt by seven levels to CCC-, three grades above default, on Feb. 15 from BB.
To contact the reporter on this story: Neil Unmack in London at nunmack@bloomberg.net
Last Updated: February 18, 2008 12:45 EST
So this SIV is exactly like Northern Rocks "trust", yet it's going into administration. Yet NR is 100% secure! They can't even lie well.
Wat
"It reminds me of all those fearfully clever international bankers who used to tell themselves modern states couldn't go bust"
Tell me about it. In the early 80s I was involved with a specialist consortium bank owned by some massive commercial banks. The bank's directors, much against the protests of the bank's executives, decided that the consortium bank should take on sovereign debt from gems like Mexico, Rumania and Poland. Why, you may ask? Apparently to "balance" the portfolio which was weighted too heavily in "risky" commercial loans.
The consortium bank went bust of course and one of the consortium partners was paid by the others to take it over. By that time the only assets were those "risky" commercial loans. Fortunately none of the directors of the bank (all appointed and staff members of the consortium bank's owners) suffered in the slightest. One (now knighted) eventually rose to the top of one of our largest clearers; another - on his eventual retirement - was feted and awarded a massive addition to his pension fund. To the contrary, (with a single exception) the consortium bank's staff were all fired.
If the past is any guide to the future, I expect Applegarth (along with the rest of the destruction team from NR) to find a position where his evident incompetence will be handsomely rewarded: perhaps a Bank of England directorship alongside another celebrated incompetent .
So this SIV is exactly like Northern Rocks "trust", yet it's going into administration. Yet NR is 100% secure! They can't even lie well.
No, cos:
1) Whistlejacket invests in US monoline insurers, not in UK residential property
2) The deal StanChar has reached with Deloitte over Whistlejacket is precisely to avoid winding the thing up and doing a firesale of its assets. Deloitte is allowing this to happen because it believes that the underlying assets are sound and that the problem is with liquidity.
Saying "ooh, this SIV is bust, so this one must be too" is as daft as saying "Enron was crooked, so private business is rubbish and we should nationalise everything"....
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