Wednesday, February 20, 2008

Standard Chartered Abandons Funding $7.15 Billion SIV (Update2)

(Bloomberg) -- Standard Chartered Plc abandoned a plan to refinance its $7.15 billion Whistlejacket Capital Ltd. structured investment vehicle, the largest SIV run by a bank to collapse.

The London-based bank blamed the ``continuing deterioration in the market'' for its decision, in a statement today.

Whistlejacket will become the sixth SIV to default if it doesn't make a payment by Feb. 21 when a three-day grace period ends, according to Standard & Poor's. SIVs with more than $20 billion of total assets are in default, including funds managed by New York-based Ceres Capital LLC and Cheyne Capital Management (UK) LLP in London.

SIVs, funds that use short-term borrowing to buy longer- dated assets, are failing 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 with more than $140 billion of assets.

Whistlejacket appointed receivers after a decline in the value of its holdings triggered rules forcing it to wind down. Deloitte & Touche LLP was working with Standard Chartered this week on the bank's proposal to buy assets from the SIV, according to Neville Kahn, a receiver at Deloitte.

Deloitte didn't pay notes due Feb. 15, S&P said.

`No Fire Sale'

Standard Chartered cited the ``impracticality of completing any proposal within the confines of the receivership'' for withdrawing the proposal.

The receiver is considering ways to refinance the SIV or letting the assets pay down, and is in discussions with a number of financial institutions, Deloitte's Kahn said in interview today.

``There is no need for a fire sale of assets,'' he said.

Standard Chartered more than halved Whistlejacket's assets from $18.2 billion since August after the SIV sold holdings to repay maturing debt, the bank said last month. The SIV sold some assets to investors in its junior-ranking bonds in return for repaying their debt in deals known as vertical slices.

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