Moody's Investors Service said that the US$64.9 billion in debts sold by Citigroup Inc's structured investment vehicles (SIV) was cut or placed on review for a downgrade as part of a review of $130 billion of SIV debt.
The ratings company surveyed 20 SIVs since Nov. 7 and expanded its review after noticing "significant additional deterioration" in asset values, it said in a statement on Friday.
Links Finance Corp, an SIV sponsored by the Bank of Montreal with US$19.1 billion of debt, may have its ratings cut, Moody's said.
SIVs, which sell short-term debt to buy longer-term, higher-yielding assets, were shut out of the short-term market as losses on subprime mortgage securities prompted investors to retreat from all but the safest of securities. Unable to finance themselves, three SIVs have defaulted and others are being bailed out by their sponsors. The world's 30 SIVs have more than US$300 billion in assets.
"In recent weeks, Moody's has observed material declines in market value across most asset classes in SIV portfolios," the ratings company said in the statement.
Moody's cut US$14 billion in debt in all, mostly capital notes that rank below commercial paper and medium-term notes and are usually the first to absorb losses, Henry Tabe, managing director in charge of structured finance, said in a telephone interview.
The ratings company placed US$105 billion of debt on review for a downgrade and confirmed the ratings on US$11 billion, Tabe said.
SIV assets on average are 38 percent financial institution debt, 16 percent asset-backed securities and 12 percent collateralized debt obligations, Moody's said.
The downgrades are "a reflection of the continued deterioration in market value of SIV portfolios combined with the sector's inability to refinance maturing liabilities," Moody's said.
Net asset values have slumped to 55 percent from 102 percent in June, Moody's said, including the NAVs of the three defaulted SIVs.
Citigroup, the largest US bank by assets, provided US$7.6 billion in emergency financing to the seven SIVs it runs earlier this month after they were unable to repay maturing debt.
The New York-based bank created the first SIV in 1988 and is the largest manager.
The SIV's struggle for survival and the threat of having their assets dumped on the market prompted US Treasury Secretary Henry Paulson to broker talks with Citigroup, JPMorgan Chase & Co. and Bank of America Corp to form an US$80 billion fund to help bail them out.
HSBC Holdings PLC of London this week said it would take on US$45 billion in assets from the two SIVs it manages after they were unable to finance themselves. SIVs set up by Dusseldorf-based lender IKB Deutsche Industriebank AG and London-based Cheyne Capital Management Ltd defaulted last month after investors stopped buying their asset-backed commercial paper.
Citigroup said in a Nov. 5 regulatory filing that it "will not take actions that will require the company to consolidate the SIVs." The strategy "remains unchanged from the disclosures in the third quarter" filing, spokesman Jon Diat said on Friday in an e-mail statement.
"We continue to focus on liquidity and reducing leverage," Diat said.
Citigroup's SIV assets have dropped to US$66 billion from US$83 billion on Sept. 30, Diat said.
Centauri Corp, the largest SIV run by Citigroup with US$16.9 billion in debt, had its P1 commercial paper rating placed on review for downgrade as well as its AAA medium-term note program, Moody's said. Centauri's net asset value dropped to 60 percent from 85 percent since Sept. 5, Moody's said.
‘SWASTICAR’: Tesla CEO Elon Musk’s close association with Donald Trump has prompted opponents to brand him a ‘Nazi’ and resulted in a dramatic drop in sales Demonstrators descended on Tesla Inc dealerships across the US, and in Europe and Canada on Saturday to protest company chief Elon Musk, who has amassed extraordinary power as a top adviser to US President Donald Trump. Waving signs with messages such as “Musk is stealing our money” and “Reclaim our country,” the protests largely took place peacefully following fiery episodes of vandalism on Tesla vehicles, dealerships and other facilities in recent weeks that US officials have denounced as terrorism. Hundreds rallied on Saturday outside the Tesla dealership in Manhattan. Some blasted Musk, the world’s richest man, while others demanded the shuttering of his
TIGHT-LIPPED: UMC said it had no merger plans at the moment, after Nikkei Asia reported that the firm and GlobalFoundries were considering restarting merger talks United Microelectronics Corp (UMC, 聯電), the world’s No. 4 contract chipmaker, yesterday launched a new US$5 billion 12-inch chip factory in Singapore as part of its latest effort to diversify its manufacturing footprint amid growing geopolitical risks. The new factory, adjacent to UMC’s existing Singapore fab in the Pasir Res Wafer Fab Park, is scheduled to enter volume production next year, utilizing mature 22-nanometer and 28-nanometer process technologies, UMC said in a statement. The company plans to invest US$5 billion during the first phase of the new fab, which would have an installed capacity of 30,000 12-inch wafers per month, it said. The
Taiwan’s official purchasing managers’ index (PMI) last month rose 0.2 percentage points to 54.2, in a second consecutive month of expansion, thanks to front-loading demand intended to avoid potential US tariff hikes, the Chung-Hua Institution for Economic Research (CIER, 中華經濟研究院) said yesterday. While short-term demand appeared robust, uncertainties rose due to US President Donald Trump’s unpredictable trade policy, CIER president Lien Hsien-ming (連賢明) told a news conference in Taipei. Taiwan’s economy this year would be characterized by high-level fluctuations and the volatility would be wilder than most expect, Lien said Demand for electronics, particularly semiconductors, continues to benefit from US technology giants’ effort
MULTIFACETED: A task force has analyzed possible scenarios and created responses to assist domestic industries in dealing with US tariffs, the economics minister said The Executive Yuan is tomorrow to announce countermeasures to US President Donald Trump’s planned reciprocal tariffs, although the details of the plan would not be made public until Monday next week, Minister of Economic Affairs J.W. Kuo (郭智輝) said yesterday. The Cabinet established an economic and trade task force in November last year to deal with US trade and tariff related issues, Kuo told reporters outside the legislature in Taipei. The task force has been analyzing and evaluating all kinds of scenarios to identify suitable responses and determine how best to assist domestic industries in managing the effects of Trump’s tariffs, he