HSBC Restructuring Sets the Pace for Other SIVs

HSBC announced that its SIV Cullinan Finance’s income note investors unanimously accepted the voluntary exchange offer announced by HSBC on Nov. 26. The HSBC exchange offer was the first comprehensive restructuring plan announced for a major SIV. It is also the first restructuring plan to reach this stage of the process.Under the terms of the exchange offer, all Cullinan investors have elected to exchange their income notes for notes issued by two new vehicles, Mazarin Funding and Barion Funding. Mazarin is an ABCP conduit that will issue commercial paper and medium-term notes that are expected to be rated ‘A-1+’/’P-1’/’AAA’/’Aaa’ and will be backed by a 100% liquidity facility provided by HSBC. Barion is a term-funded vehicle. Mazarin and Barion will have combined senior funding of about US$26 billion. HSBC said its restructuring plan provides a long-term solution to address the funding constraints faced by SIVs and the new vehicles also provide for the removal of market-value triggers. The success of the Cullinan exchange offer shows that HSBC’s restructuring plan has safeguarded the interests of investors. HSBC also said that CP and MTN investors will be offered an opportunity to sell their Cullinan senior debt and purchase Mazarin senior debt. Cullinan will be wound down after its assets are transferred to Mazarin and Barion and its senior debt is switched out or matures. Meetings with Asscher Finance income note and mezzanine note holders are scheduled to begin next Monday. A formal exchange offer for the income and mezzanine notes will follow within two to four weeks. The vehicle that will replace Asscher will have senior funding of about $6 billion.