Goldman will provide liquidity and arrange the restructuring of the $7bn SIV, in a plan that could provide a model for the revitalisation of other structured investment vehicles that have collapsed amid the chaos of the credit markets.
Deloitte & Touche, the receivers of SIV Portfolio said in a statement on Monday it had “reached an agreement on non-binding heads of terms for the sale of the entire investment portfolio held by the company to Goldman Sachs International and/or alternative bidders.”
The plan provides the creditors with three options. Namely, pull out of the vehicle and take the cash value of their investments, reinvest in the new vehicle or take direct ownership of the underlying securities in what is known as a vertical strip. Creditors can also combine the three options, said Mr Kahn.
The plan doesn’t need creditor approval and feedback so far has been good, said Neville Kahn, a partner at Deloitte & Touche.
“What the creditors like about this is the options,” Mr Kahn said.
SIV Portfolio was the first of a string of SIVs to run into trouble and call in receivers and stop paying creditor during this summer’s asset-backed commercial paper market turmoil.
The formation of a concrete plan could provide optimism for other similarly troubled SIVs searching for ways to mitigate potential losses.
SIVs borrow money in the short-term money markets and invest that money in longer-dated assets. When the commercial paper markets all but seized up, many were left with a liquidity crisis..