SunTrust to Buy $1.4B in SIVs, Write Down $250M

In an 8-K form filed with the SEC Thursday, SunTrust Banks, Inc. (STI) revealed it intends to purchase approximately $1.4 billion of securities issued by Structured Investment Vehicles [SIVs] from its STI Classic Prime Quality Money Market Fund and STI Classic Institutional Cash Management Money Market Fund. The purchases will lead to a writedown of $225 to $250 million before taxes in its current quarter (F4Q07). Through its latest actions, SunTrust will keep its money-market funds, traditionally considered among the safest investments, from ‘breaking the buck’ and falling below the $1-a-share promised to investors. ‘Breaking the buck’ can potentially cause investors to panic and withdraw their money en-masse from a given fund. Despite its expected writedown, management “expects to be profitable in the fourth quarter of 2007 and maintain its current dividend.” The company’s dividend yields 4.79% at current trading prices. According to SIV industry expert Peter Crane, publisher of Money Fund Intelligence, “SunTrust is being extremely conservative. They will recover almost all of it next year.” SunTrust shares fell 3.8%.

Sources: Form 8-K, Bloomberg, Wall Street Journal
Additional Reading: Money Market Funds Scramble To Avoid "Breaking the Buck" - WSJ ? SunTrust Banks Q3 2007 Earnings Call Transcript

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