Wednesday, December 19, 2007

SuperSIV Bailout Fund

Dec. 18 (Bloomberg) -- The SuperSIV' fund, set up to provide cash to structured investment vehicles hurt by the collapse of the subprime-mortgage market, plans to start buying assets within weeks,' its sponsors said today.

The fund's size, originally envisioned at about $80 billion, will be based on SIVs' needs and evolving market circumstances, Citigroup Inc., Bank of America Corp., JPMorgan Chase & Co. and BlackRock Inc. said in an e-mailed statement. The banks are raising money for the fund while BlackRock will manage its assets.

The urgency that led to the SuperSIV's creation eased after separate SIV bailouts by banks including Citigroup and London- based HSBC Holdings Plc. New York-based Citigroup said last week it would take over seven SIVs with $58 billion of debt. Banks want to avoid forced assets sales to repay SIV borrowings because that would further roil credit markets and reduce the value of their own debt holdings.

The fund, also known as the Master Liquidity Enhancement Conduit, or M-LEC, can still provide ``an optional source of liquidity for eligible high-quality assets,'' the banks said in the statement.

SIVs, which sell short-term debt and invest the proceeds in higher-yielding securities, have cut their holdings by more than 25 percent since August to $298 billion, according to Moody's Investors Service in New York. That's when investors started shunning SIV commercial paper and medium-term notes amid increasing losses on subprime mortgages.

Question: Will this SuperSIV fund help to stabilise the markets?

1 comment:

doc holiday said...

This orderly unwinding of SIVs is contributing to improved market stability.

Now we can all get back to CDO and abx matters after The Fitch downgrade last week: E,g: Structured Asset Investment Loan Trust 2006-4
SAIL06-4 2006-4 M8 USD
Once we blow through a few billion here and there, stability will be within reach just in time for the subprime resets!!

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