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Thursday, August 23, 2007

Trouble In SIV-Lite Land

by Tanta on 8/23/2007 10:13:00 AM

The Financial Times reports on these "SIV-lite" things that have been confusing us all:

More than $4bn worth of bonds backed by residential mortgages and other structured debt products could soon hit the market as a result of forced sales by the so-called SIV-lite sector – a type of vehicle hurt by the recent short-term debt market turmoil.

Many market participants have struggled to raise funds in the asset-backed commercial paper market but the problem has proved critical for two particular SIV-lite vehicles.

Mainsail II, a $2bn vehicle run by Solent Capital in London, has been forced to begin selling assets, while Golden Key, a $1.9bn vehicle run by Avendis of Geneva, had its commercial paper notes downgraded to the market equivalent of junk status on Friday by Moody’s Investor Services, the ratings agency, and is also expected to sell its assets.

SIV-lites are essentially collateralised debt obligations which pool together bonds backed by mortgages and other asset-backed debt. The main difference is that other CDOs sell long-term senior debt to fund their assets while SIV-lites raise senior debt in the short-term ABCP markets.

SIV-lites are a relatively recent market development and only five have so far been launched. . . .
I'd say something useful about this, but I haven't been drinking coffee long enough. The first time through I read "Solent" as "Soylent." The second time I read it as "Salient" (in the military sense). I'm not going to read it again until after noon.