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Structured finance market round up: Fitch tightens Knot

Fitch Ratings has placed Sigma Finance’s senior note programme on negative watch, in a move affecting $31.6 billion of medium-term notes rated triple A and some $2.3 billion of F1 rated CP.

Gordian Knot, which runs Sigma, does not call itself a structured investment vehicle but effectively a bank. Nevertheless it has run into the same problems of declining market value for high-quality assets that many SIVs have suffered from. Fitch cited the asset and liability term mismatch and a lack of 100% liquidity line back-up as reasons for its move, while acknowledging that Sigma had a greater mix of intermediate-term funding before the credit crunch. The use of repo and modest liquidation of assets to pay down maturing debt has failed to stop Fitch’s concern over the Sigma’s funding strategy.

The prospect of substantial asset sales from SIVs continued in January. A €9 billion list, rumoured to be from Stanfield Victoria Finance, circulated ABS dealing desks. Market participants say it was not an actual bid list but rather a valuation exercise before liquidation.

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