search   Knowledge Bank printable version
 Knowledge Bank
 Deal Information
 Industry Events
 Advocacy Forums
 Site Utilities
 Free Offers

Click here to
Update Registration

Please be advised that the use of ®
is subject to the
Terms & Conditions

of use and the
Privacy Policy


Best viewed in

Knowledge Bank > Rating Criteria > Commercial Paper
Select an area

FREE Three-week trial of Asset-Backed Alert's newsletter

HSBC Weighing Multi-Tiered SIV Structure
Asset Backed Alert, Harrison Scott Publications Inc. (September 8, 2006)

HSBC may set up a structured investment vehicle that would appeal to a different crop of subordinate investors than its only existing SIV.

The entity, which could hit the market by April 1, would give the bank a new means of expanding an already growing portfolio of mostly structured-product investments that currently weighs in at $48 billion. Those holdings, consisting mainly of top-shelf asset-backed securities, mortgage bonds and collateralized debt obligations, are overseen by Dominic Swan in London.

HSBC keeps about $8 billion of the investments on its books. The rest are split between its SIV, called Cullinan Finance, and a commercial-paper conduit known as Solitaire Funding.

The new securities-arbitrage vehicle would be similar to Cullinan, with one major exception: Its senior securities would be supported by both single-A-rated capital notes and an unrated first-loss piece, mimicking a structure used by Citigroup's Sedna Finance SIV.

SIVs typically borrow against their capital notes by issuing senior asset-backed commercial paper and medium-term notes. As a rule, the junior classes carry triple-B ratings and serve as their only subordinate layers.

Offering those securities in a mezzanine format would make them behave more like traditional asset-backed bonds that deliver specific returns as long as they don't default. And they would present a lower level of risk that should attract a wider swath of investors, Swan said.

Unlike the holders of traditional capital notes, however, the buyers of those instruments won't get a cut of the issuing vehicle's excess profits. Instead, those returns would go to the most junior investors.

Cullinan now has about $22.5 billion of senior paper and $1.5 billion of capital notes in the hands of investors. Swan expects the vehicle's total portfolio to reach $30 billion by yearend.

Meanwhile, Moody's and S&P are close to approving a new $24 billion funding limit for Solitaire, which only has $3 billion of room left before hitting its current ceiling of $18 billion. HSBC expects the conduit's outstandings to reach $20 billion by yearend.

On the staffing front, Swan wants to hire a portfolio manager to focus on investments in CDOs for Solitaire and HSBC's own book under director Andrew Jackson. HSBC is also looking for analysts to help analyze investments for the SIV, conduit and bank portfolios.



© Copyright 2014. The Mayer Brown Practices. All rights reserved.

Mayer Brown is a global legal services provider comprising legal practices that are separate entities (the “Mayer Brown Practices”). The Mayer Brown Practices are: Mayer Brown LLP and Mayer Brown Europe – Brussels LLP, both limited liability partnerships established in Illinois USA; Mayer Brown International LLP, a limited liability partnership incorporated in England and Wales (authorized and regulated by the Solicitors Regulation Authority and registered in England and Wales number OC 303359); Mayer Brown, a SELAS established in France; Mayer Brown JSM, a Hong Kong partnership and its associated entities in Asia; and Tauil & Chequer Advogados, a Brazilian law partnership with which Mayer Brown is associated. “Mayer Brown” and the Mayer Brown logo are the trademarks of the Mayer Brown Practices in their respective jurisdictions.

Legal Notices | Attorney Advertising | Site Index | Contact Webmaster

*The site links listed on this web site are for reference use only.
The firm does not necessarily sponsor, endorse or verify the accuracy of the content contained in any of these sites.