June 18, 2008 / 8:07 AM / 11 years ago

Goldman completes $7 billion SIV restructure

LONDON (Reuters) - Goldman Sachs has completed a long-awaited rescue of a $7 billion (3.6 billion pound) structured investment vehicle, the receivers said on Tuesday, paving the way to clear up more troubled mortgage assets.

A view of 85 Broad Street where U.S. investment bank Goldman Sachs is headquartered in New York, March 5, 2008. REUTERS/Joshua Lott

The deal to restructure the SIV, formerly run by British hedge fund Cheyne Capital, comes as Wall Street’s biggest investment bank beat expectations by avoiding major losses on assets, though quarterly earnings dropped by 11 percent.

“We are delighted ... we are in a position to sign a restructuring agreement in respect of the Cheyne Finance portfolio today,” said Neville Kahn, of accountancy firm Deloitte and Touche LLP, who act as receivers.

Under the restructuring, Deloitte will price the assets in the market, selling a minority part of the portfolio to the group of creditors who want to cash out, the parties involved said in an official statement.

That will allow Deloitte to sell the rest of the assets to the remaining creditors — who have already agreed to reinvest that money in a newly established vehicle set up by Goldman Sachs — which will hold the rest of the portfolio.

The sale of the securities is expected to be completed on or about July 17, Deloitte said in the statement.

Other SIVs, including Golden Key, Whistlejacket and Rhinebridge, are expected to follow Cheyne’s model, being restructured by Goldman, said Stephen Peppiatt, at Bingham McCutchen, a legal advisor to a Cheyne senior creditor.

“We thought that Cheyne would be restructured some time ago, it has taken longer, but now there is a template that others will follow,” Peppiat said.

The Cheyne Capital SIV collapsed last year as the credit crunch hurt the value of its investments in asset-backed securities and collateralised debt obligations (CDOs).


Goldman Sachs laid off hundreds of investment bankers last week, people familiar with the situation and recruiters told Reuters on Monday, with one insider saying 25 percent of employees at the vice-president level were let go.

The cuts were seen as a reaction to slowing markets and a slump in merger activity in the wake of the credit crisis.

Yet finalisation of the restructuring deal, which was first announced in December, provides a glimmer of hope for the revival of the market in troubled mortgage assets that are at the core of the global credit crisis.

“The good news is that we are capable of valuing these assets and that we can move on from this phase to the next one,” said Jeroen van den Broek, a credit strategist at ING.

SIVs ran into trouble last August when liquidity in the credit markets dried up, preventing them from raising funds and also causing the value of their assets — mainly bank debt and asset-backed securities — to drop.

SIVs, held by banks, hedge funds or other institutions, issue a mixture of short-term debt and capital to buy longer-term assets, which pay more interest than the amount they pay on their notes.

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