Citigroup Says Its SIVs Are "Very Strong"

by: SA Eli Hoffmann

Citigroup issued a statement Thursday aimed at easing investor concerns over the health of its SIVs, after a Wednesday article in the Wall Street Journal said the bank held nearly $100 billion in the vehicles, a full 25% of the market (full story). In filings to the LSE, Citibank said seven of its structured investment vehicles, or SIVs, collectively raised almost $7.6 billion from commercial paper in August, despite "unprecedented dislocation" in the market. "We believe the SIV model remains sound," Citibank said. Similar vehicles held by other banks have had to sell some assets at a loss to repay maturing debt. SIVs issue short-term debt, such as commercial paper, and buy higher-yielding, longer-dated assets like consumer loans, asset-backed securities and bank debt, pocketing the spread. Due to a quirk in U.S. GAAP, they don't appear on the holding company's balance sheet. Citibank said none of the seven SIVs' assets have been downgraded, and that the market would have to deteriorate by four times its present level before senior debt investors suffered losses. The SIVs sold $5.3B in assets August, it said, "in the interests of prudence." The vehicles would have 6 to 21.6 months to sell their assets and repay senior debt if terms were breached, it said, "as opposed to an immediate fire sale as some press speculation seems to suggest."

Sources: AP, Reuters
Commentary: WSJ's Fun With Numbers On Goldman and CitiStalled Giants: MSFT, C, MRK, PFE, HD, GM
Stocks/ETFs to watch: C

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