HedgeCo.Net (West Palm Beach) – UK based Standard Chartered has ditched its $7.2 billion structured investment vehicle after assets fell further and “the confines of receivership” took a toll on the fund.
The Whistlejacket fund, an SIV that issued short-term debt backed by investments in long-term securities, went into receivership earlier this month in hopes of reorganization and to avoid liquidation.
Standard Chartered looked to Deloitte & Touche to head the rescue, but the bank stated yesterday that they would be unable to revive the fund due to deteriorating market conditions.
"Standard Chartered is disappointed that it has been unable to find a viable solution to ensure flexibility for Whistlejacket due to these changes in circumstances," the bank stated.
Another factor was the decision by the receivers not to pay back some of the holders on a debt that matured last week. If they don’t pay the loan back by today, they are officially in default status, and the rest of their investments will be afflicted with the highly unfavorable “junk bond” status.
The bank had "tried doggedly over months to find a solution,” however, SIV’s as a whole have not fared too well as of late. Major players in the field like HSBC and Bank of America have found it difficult to find buyers for their debt, due to the constant need to renew funding. The illiquidity in the market that resulted from the subprime mortgage crisis made investors shy away from SIV’s, though in all actuality, SIV’s contain very little subprime exposure.
Orange County, CA is just one of the investors eagerly awaiting the outcome. The once bankrupt county has $80 million invested in Whistlejacket, and another $850 million spread throughout other SIV’s.
Julie Scuderi
Senior Editor for HedgeCo.Net
Email: [email protected]
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