Belatedly, Standard Chartered’s SIV, Whistlejacket Capital, has come back to bite the bank.
Standard may have stressed repeatedly that it had no meaningful exposure to this vehicle and had no intention of taking Whistlejacket on to its balance sheet – but that’s precisely what it is now doing, albeit in a limited way.
The news accompanied a generally robust pre-close trading statement from Standard on Wednesday, with chief executive Peter Sands boasting that strong underlying trading across the board had easily outweighed any localised crunch-related difficulties.
But Whistlejacket is a SIV – and like all SIVs it hasn’t had the access to the commercial paper it needs to keep churning.
So Whistlejacket has been going through what amounts to a staged break-up – offering its underlying assets to holders of its capital notes. Standard has already exchanged $140m of its capital notes in Whistlejacket for $1.68bn of assets, which will now sit on Standard’s balance sheet. An accompanying write-down will cost the bank $46m.
Standard added:
It is highly likely that the Group will undertake a further ‘vertical’ slice which will be effected before the end of the year, alongside similar transactions by a number of other capital note holders.
Since the bank has said in the past that its capital note holdings in Whistlejacket amounted to $250m, we can assume that another $1bn or so of the SIV’s assets are headed in Standard’s direction.