The saga of Sigma Finance — God’s gift to structured finance writers, with its shadow banking connotations, Gordian Knot connection and ‘event’ associations — is lurching to its end.
On Monday, liquidators of the erstwhile $27bn SIV issued their final statement.
It tells the tale of the October 2008 collapse of the Structured Investment Vehicle, but also the challenge facing receivers in distributing its assets to creditors. For a start, they needed to figure out how to split the remaining money amongst creditors with different maturity dates.
But they were also dealing with not many assets, and not very desirable ones at the time either :
SIVs, you may or may not remember, invested in Asset-Backed Securities (ABS) by issuing short-term paper. As you might expect, that ABS was not heavily sought-after during the financial crisis — which meant Sigma’s receivers were only able to get $310m for its securities in a late 2008 auction.
And, after the auction Sigma had cash and, for some reason, a single bank share:
Anyway, the end of the story is kind-of a happy one, considering almost all Sigma investors were once thought to be looking at total losses. Instead, as one of our Long Room members points out, it looks like holders of Sigma ABS will now get 5.16 per cent of their money back — on a pari passu principle.
But, we bet they won’t be touching SIVs again anytime soon.
Not that they could, anyway.
Related links:
SIV restructuring poses unique problems for insolvency specialists – FT
Sigma Finance case over-ruled: A return to pari passu? - Freshfields briefing
Canadian ABCP saga lives on – FT Alphaville
Moving mountains, rebuilding markets – FT Alphaville