For those of you who haven’t followed the SIV mess closely, Cheyne ran around early on and went into receivership. The Financial Times reports that the receivers have arranged a refinancing and restructuring with Goldman that may serve as a model for the resolution of other troubled SIVs. its attractive feature is that it allows investors to chose among three liquidation options.
From the Financial Times:
An agreement was reached on Monday on the sale of Cheyne Finance SIV, a structured investment vehicle now known as SIV Portfolio, to Goldman Sachs.
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.
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Repurchase agreements:
When Y2K became a non-crisis, the Fed decided not to roll over the repurchase agreements, banks called in the loans, and demand for dot.com and other technology stocks was undermined.
November 2007: In response to heightened pressures in money markets for funding through the year-end, the Federal Reserve Bank of New York’s Open Market Trading Desk plans to conduct a series of term repurchase agreements that will extend into the new year.
The first such operation will be arranged and settle on Wednesday, November 28, and mature on January 10, 2008, for an amount of about $8 billion. The timing and amounts of subsequent term operations spanning the year-end will be influenced by market and reserve developments.