StanChart pulls proposal to inject liquidity into investment vehicle
Standard Chartered has withdrawn its proposal to rescue Whistlejacket Capital, a US$7.15 billion structured investment vehicle (SIV) managed by the bank that was forced into receivership last week.
The bank yesterday said the withdrawal of the proposed liquidity injection would have no material impact on the lender. But analysts said it might need to make additional provisions for Whistlejacket assets brought on to its balance sheet last year if the market deteriorated.
The bank said last week its proposal to inject liquidity into Whistlejacket, which uses short-term debt to invest in longer-term assets, lapsed when the SIV was forced into receivership after it lost more than half its net asset value.
However, Standard Chartered said it would ask the receiver to find other solutions.
The British lender said conditional proposals made to the receiver had been withdrawn, as the market for certain asset classes had deteriorated and completing any proposal within the receivership was impracticable.
The receiver, Deloitte & Touche, was seeking other solutions and a fire sale of Whistlejacket's assets was not an option, Reuters reported, quoting Neville Kahn, the partner in charge of the receivership.
'It's not easy to have a white knight in the short term,' said William Wong Kwok-wai, an analyst at BOCI Research. He said it was likely Whistlejacket would be in default if it could not repay maturing debt.
Standard & Poor's has said Whistlejacket might default this week if it did not make a payment today.
Tim Baxter, a spokesman at Standard Chartered, said there would be no material impact on the bank if Whistlejacket defaulted because it had no other exposure.
The bank brought US$3.3 billion of Whistlejacket's assets on to its balance sheet last year and made an impairment charge of US$116 million.
'We believe that the underlying assets are of good quality; it is just the mark-to-market valuations that have fallen,' Mr Baxter added.
Mr Wong said Standard Chartered was likely to make further impairment charges this year on those assets.
Goldman Sachs estimated that in a worst-case scenario, an additional provision of US$235 million for Whistlejacket would be added.
Mr Wong said Citic Ka Wah Bank, as one Whistlejacket noteholder, would also need to make additional provisions if a default occurred.