HSBC gives $35 million support to two SIVs

Source: Exec Digital UK

Date :26/11/2007 17:32:55

HSBC Holdings Plc, Europe's biggest bank, has stepped in to support its two structured investment vehicles - Cullinan and Asscher - with funding of up to $35 billion to prevent forced sales of assets.

HSBC, one of the biggest in the structured investment vehicle (SIV) market, said on Monday it will consolidate $45 billion of assets and related funding from Cullinan Finance Ltd and Asscher Finance Ltd onto its $2.1 trillion balance sheet and set up new debt-issuing vehicles.

Structured investment vehicles, or SIVs are investment vehicles which raise money in the short-term commercial paper market and use it to invest in longer-term assets, such as mortgages.

The viability of an SIV relies on its ability to continue borrowing money.

SIV confidence

London-based HSBC plans to integrate the two funds into the bank's balance sheet to rescue them from losses.

Stuart Gulliver, chief executive of HSBC's investment banking and markets division, said in a statement HSBC's actions "will set a benchmark and restore a degree of confidence to the SIV sector."

Earlier this month, bankers from Citigroup Inc., JPMorgan Chase & Co. and Bank of America Corp. announced an agreement on a multibillion-dollar fund to buy distressed debt securities.

HSBC, whose SIVs are among the largest in the market, said it would not be participating in that fund.

November 26, 2007