Standard Chartered Takes on $1.7 Billion SIV Assets

Asia-focused Standard Chartered said on Wednesday the dislocation in the credit markets and the liquidity crunch had forced it to take $1.7 billion of assets from a debt vehicle onto its balance sheet.

Standard Chartered -- an investor in the capital notes of the Whistlejacket structured investment vehicle (SIV) that it manages -- said the SIV had offered capital note holders the opportunity to take "vertical" slices of its portfolio to cope with a drop in the value of its assets.

SIVs, off-balance sheet vehicles set up mainly by banks, issue a mixture of short-term senior debt and longer-term capital notes and invest the proceeds in long-term securities, mainly bank debt and asset-backed securities.

They have been hit by a double whammy as their access to financing has dried up in the credit turmoil and the value of the securities they hold has fallen sharply.

Standard Chartered, which said it was likely to take on further assets before the end of the year, said it had exchanged $140 million of capital notes for a slice of Whistlejacket assets amounting to around $1.68 billion.

The move, it said, will have an impact on the bank's Tier 1 capital ratio of less than 0.1 percent.

Whistlejacket assets stood at $10.8 billion at the end of November.

"The group remains confident in the underlying quality of the assets acquired and it is expected that the temporary write down in value will flow back through income over the next three and a half years, which is the average life of the assets," the bank said.

Standard Chartered said the assets remained of "a very high quality", 95 percent rated Aa or higher by Moody's Investors Service.