Structured finance: Buyers rediscover their appetite for ABS
The latest SIV auction has proved a welcome fillip for the structured finance market.
Given the pounding they have received for nearly two years now, structured finance investors could be forgiven for seeing their glass as half empty rather than half full. At many points it seemed as if there was no floor low enough for these securities – and just when it appeared that valuations could not fall any further – they did. In late May, however, they could have been forgiven for thinking that they had just woken up from a bad dream: a portfolio of ABS and CDO securities was put up for sale and not only were investors falling over themselves to buy but many did not get their orders filled and came away disappointed.
No, this was not a parallel universe, it was the auction of a portion of the failed Whistlejacket structured investment vehicle. The $7 billion fund defaulted in February 2008 when it was cut loose by sponsor Standard Chartered. In late April, receiver Deloitte auctioned off just over 54% of the remaining securities in a $2.5 billion sale. The last time that a SIV portfolio was auctioned off in this way – the sale of 20% of the assets of another defaulted vehicle, Cheyne Finance – the process was a depressing fire sale, with just 11 bids for $1.7