(Releads with Moody’s downgrade)
LONDON, Feb 12 (Reuters) - Moody’s Investors Service on Tuesday slashed its ratings on Standard Chartered’s $7 billion Whistlejacket structured investment vehicle (SIV) after a plan to provide liquidity fell through.
Deloitte also said on Tuesday it had been appointed as receiver for the SIV, a step Standard Chartered was forced to take after the vehicle breached triggers that meant it had to be wound down.
In a sign of how severe the market pressures on these vehicles have become, Moody’s said Whistlejacket’s capital value — a measure of how much the riskiest debt issued by Whistlejacket is worth — had plummeted to 41 percent from 55 percent in just four trading days between Feb. 6 and Feb. 11.
As a result, it chopped Whistlejacket’s senior debt ratings by a whopping 11 notches to a “junk” grade Ba2 from the top rating of Aaa.
Standard Chartered said on Monday that a plan to provide liquidity to Whistlejacket had fallen through after the drop in the value of the SIV’s assets had triggered a so-called enforcement event, requiring the appointment of a receiver.
SIVs raise short-term debt and invest the proceeds in longer-term securities, mainly bank debt and asset-backed securities. They have faced problems as the subprime crisis has led funding to dry up at the same time as the value of their assets has dropped sharply.
Standard Chartered had been planning to provide $7.15 billion of liquidity support for Whistlejacket, but had placed conditions on that funding — including that the SIV not be in enforcement. The bank said on Monday it would discuss alternative liquidity arrangements with the receiver and said the assets held good long-term value.
Monday’s news added to fears that there could be further forced selling of corporate debt and structured finance securities, pushing European credit spreads wider.
Moody’s said there were now several options, including early repayment of the senior debt, repayment of senior debt as it falls due, and completion of Standard Chartered’s liquidity plan.
It said 64.4 percent of Whistlejacket’s portfolio was rated Aaa, 32.8 percent in the double-A category, and 2.8 percent in the single-A category. It said there had been no credit losses on the portfolio.
Deloitte is also handling the restructuring of the Cheyne Finance SIV, set up by hedge fund Cheyne Capital Management, and the Rhinebridge Plc SIV set up by German bank IKB IKBG.DE.
Neville Khan, Nick Dargan and Nick Edwards of Deloitte will act as receivers for Whistlejacket, the firm said in a statement. (Reporting by Richard Barley, editing by Will Waterman)