Due to this information below, given to you, don't act surprised as others will, when it suddenly merges with another bank! Banks will be increasingly go "global" as they struggle to find other currencies to keep the "liquid".
Ratings agencies are lowering their estimates of what the SIVs are worth (Citicorp 60%), but they are flying by by the seat of their pants trying to figure out just how much debt to write down when doing an assessment(s). While it seems "easier", no one ends up any closer to the TRUTH; the real assets ledger goes begging and the Enron-style accounting practices just continues. You either you know or you don't. Granted, the values of what bank holdings actually are is far less than what anyone's been told, but this guesstimate's business is part and parcel of the whole problem with lack of regulation of all sectors in the financial community which is ever so busy covering its less than professional ass. You see getting it right would entail doing something to change the "back offices" - rooting and pillaging the gamblers who've benefitted and employing competant staff who are diligent.
I can assure you that ain't gonna happen.
Instead, what there will be is tons of coming litagation that will keep people tied up for years, all making money off that - "hedging" their own personal incomes through activities related to fighting being charged with crimes and lack of diligence. Trust me on this!
Expect lots of changes on the deck of the Titanic, as executives/greedsos suddenly move from one "hat" to another. But essentially, the same old dross will be firmly in control. So the "accountant" suddenly ends of being the Human Resources guy: the head of the trading wing suddenly becomes "Compliance Officer". It's easy peesy to rewrite job descriptions, I know. I've done it when European banks came swanning into the US following deregulation and have a very fine idea how all the rearrangements are actually done. If you think the regulators care, guess again. There are actually PR firms (called consultants) who specialized in this very activity and charge a nice little buck for their services.
If nothing changes, nothing changes
~Ernie Larson
Veeger
Citigroup offloads assets from SIVs
By Paul J Davies in London, David Wighton in New York and Adam Jones in Paris
Published: December 10 2007 22:04 | Last updated: December 10 2007 22:04
Citigroup has slashed the size of its struggling off-balance-sheet investment funds by more than $15bn in two months through quiet side deals with some junior investors, according to people familiar with the business.
The news that the troubled US bank has been finding ways to offload assets from its structured investment vehicles (SIVs) without resorting to fire sales comes as Société Générale on Monday became the latest bank to announce a bail-out for its own $4.3bn vehicle. SocGen’s decision follows similar moves by HSBC, Standard Chartered and Rabobank in the past fortnight.
Previous article!!
Citigroup offloads assets from SIVs
By Paul J Davies in London, David Wighton in New York and,Adam Jones in Paris
Published: December 11 2007 02:00 | Last updated: December 11 2007 02:00
Citigroup has slashed the size of its struggling offbalance-sheet investment funds by more than $15bn in two months through quiet side deals with some junior investors, according to people familiar with the business.
The news that the troubled US bank has been finding ways to offload assets from its structured investment vehicles (SIVs) without resorting to fire sales comes as Société Générale yesterday became the latest in a string of banks to announce a bail-out for its own $4.3bn vehicle. Both moves appear likely to reduce the impetus behind plans for the so-called "super-SIV", conceived by Citigroup, Bank of America and JPMorgan with the backing of the US Treasury as a buyer of last resort for the industry that would prevent fire sales.
SIVs, which sell cheap, short-term debt to invest in higher-yielding, longer term assets, have been at the centre of the credit squeeze of recent months as all kinds of investors have ditched exposure to anything that could be tainted by exposure to US subprime mortgages.
Citi yesterday refused to comment on asset sales by its seven SIVs - all of which have been put on watch for downgrades by the rating agencies - but people familiar with the vehicles said their size had been cut from more than $80bn at the end of September to about $66bn.
Most of the cuts have come from selling portions of a SIV's portfolio of assets to investors in the most junior notes at market values.
In return for taking the loss in the value of their notes in such sales, which will be about 40 per cent in many of Citi's SIVs and putting in more money, the investors could reap greater profits later from any recovery in their value.
Meanwhile, SocGen's decision to absorb its sole SIV - which had been dubbed Pace, for 'Premier Asset Collateralised Entity' - follows similar moves by HSBC, Standard Chartered and Rabobank in the past fortnight.
The SIV industry's problems are causing headaches for US money market funds, which are big investors in their debt.
Money market fund managers have been supporting funds to ensure that their asset values do not fall below par - or "break the buck".
Bank of America yesterday said that it was winding down its $12bn Columbia Strategic Cash Portfolio, after losses on holdings of paper sold by SIVs.
The fund is an "enhanced cash" fund, a riskier form of money market fund sold only to institutions and high-net worth individuals.
The net assets of the fund have fallen to 99.4 cents on the dollar.
Citigroup SIVs Draw $7.6 Billion of Emergency Funds (Update2)
By Neil Unmack and Jody Shenn
Nov. 6 (Bloomberg) -- Citigroup Inc., the largest U.S. bank by assets, provided $7.6 billion of emergency financing to the seven structured investment vehicles it runs after they were unable to repay maturing debt.
The SIVs drew on the $10 billion of so-called committed liquidity provided by Citigroup, according to a Securities and Exchange Commission filing yesterday. Shares fell to the lowest since 2003.
Citigroup's disclosure came a day after it announced as much as $11 billion of debt writedowns linked to U.S. subprime mortgages, and the resignation of Chief Executive Officer Charles O. ``Chuck'' Prince III. The New York-based bank also said in the SEC filing that the amount of securities it owns that are considered hardest to value, known as Level 3 assets, rose 42 percent in the third quarter to $135 billion.
``This company, if it were any other company, would probably be considered to be operating in an unsafe and unsound condition,'' said Josh Rosner, managing director at New York- based investment research firm Graham Fisher & Co.
SIVs sell commercial paper to buy longer term assets such as mortgage or bank bonds. Citigroup SIVs have no direct investments in subprime assets and $70 million of ``indirect exposure'' through collateralized debt obligations, or bonds that package debt, according to the filing, based on figures as of Oct. 31.
Avoiding Fire Sale
Citigroup purchased the commercial paper from the SIVs it advises ``on arms' length commercial terms'' as part of its existing commercial paper programs, Jon Diat, a Citigroup spokesman in New York, said in an e-mailed statement today.
The bank won't consolidate the assets of the SIVs on its balance sheet, according to the filing.
Citigroup created the first SIV in 1988 and is the largest manager of the companies. The bank, along with JPMorgan Chase & Co. and Bank of America Corp., agreed last month to start an $80 billion fund to help SIVs avoid dumping their $320 billion of holdings at fire sale prices and further roiling credit markets.
Citigroup fell $1.16, or 3.23 percent, to $34.74 at 12:30 p.m. in New York Stock Exchange composite trading, after declining 4.9 percent yesterday. The stock had dropped more than 35 percent this year before today. Only National City Corp. and Washington Mutual Inc. had posted bigger losses of the 24 companies in the KBW Banks Index.
LTCM Experience
Credit-default swaps tied to Citigroup bonds traded at the highest level in at least five years yesterday, suggesting investor confidence is eroding. The contracts, used to speculate on a borrower's ability to repay debt, rise as the perception of credit quality deteriorates. The contracts fell 2 basis points to 70 basis points today, according to Phoenix Partners Group in New York.
Citigroup named Richard Stuckey, 51, to manage most of its $43 billion of subprime mortgage assets, the same executive who helped unwind hedge fund Long-Term Capital Management LP's bad bets nine years ago.
Investors are refusing to buy commercial paper, loans due in 270 days or less, from some SIVs because they are concerned about the value of the mortgage securities, asset-backed debt and finance company bonds they own.
U.S. asset-backed commercial paper shrank for 12 straight weeks to a seasonally adjusted $874.7 billion last week, the lowest since April 2006, according to the Federal Reserve in Washington.
`Backing Away'
``Citigroup has one of the more established bank-sponsored SIVs in the sector,'' said Priya Shah, a structured credit analyst at Dresdner Kleinwort in London. ``If they are drawing on their liquidity it shows that investors are backing away from the sector as a whole and they are not really differentiating.''
The largest of Citigroup's SIVs is Centauri Corp., with $20 billion of assets, according to the filing. The six other companies are Beta Finance Corp., Dorada Corp., Five Finance Corp., Sedna Finance Corp., Vetra Finance Corp. and Zela Finance Corp. All are based in the Cayman Islands.
Citigroup's SIVs sold $19 billion of assets between July and the end of September, reducing their assets to $83 billion from just over $100 billion, according to the filing. About 98 percent of the companies' assets are fully funded through the end of 2007, the filing said.
Citigroup said it doesn't own any of the SIVs' capital notes, which rank below the senior commercial paper and first in line for losses.
-- With reporting by Shannon D. Harrington. Editor: Reierson (grs/ajr)
See also: http://www.iht.com/articles/2007/12/10/business/siv.php
BusinessWeek -
One of the key problems a new Citi CEO will face is its exposure to sivs (structured investment vehicles), off-balance sheet investment funds that borrow in ...
Takeover or breakup for Citi
In the Lead
New Citi leader will inherit sprawling mess
MarketWatch -
This protects the SIVs from being forced to sell assets at a loss to meet debt repayments. Meanwhile, the Citigroup SIVs could become even more reliant on ...
No comments:
Post a Comment