Issuer: SBC Glacier Finance Series 1997-2
Amount: $1.6 billion
Issue type: repackaging of credit-linked notes
Launched: September 9
Bookrunner: SBC Warburg Dillon Read
SBC Warburg Dillon Read brought a new degree of sophistication to the art of credit risk and bank capital management with the $1.6 billion securitization deal it announced in September.
SBC writes a series of credit-linked notes to hedge the credit risks of specific counterparties taken on in a range of its international activities, including mainly lending but also bonds and derivatives trading. These notes are sold to a special purpose vehicle (SPV), which in turn uses them to collateralize $1.6 billion of floating-rate bonds issued in two equal tranches of seven and nine years.
The deal follows the bank's decision to create one division to manage its credit risk. This merges liquid and illiquid exposures from SBC's loan book, securities trading and derivatives businesses. The deal helps SBC "strip off credit risk from the original transaction where SBC has an exposure to an obligor, then bundle and sell it in a unique way to investors", says Linda Bammann, managing director at SBC Warburg Dillon Read in New York.