SIV and let live

17 June 2008 By John Foley Follow @johnsfoley

The bank has hatched a plan to rescue Cheyne Finance, the insolvent $7bn structured vehicle. It will sell some assets to price the rest. Junior investors might not like the scheme, as they will get wiped out. But the plan s simplicity could set an attractive precedent.

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Goldman Sachs has proposed a plan to bail out Cheyne Finance, a structured investment vehicle (SIV) set up by hedge fund Cheyne Capital, which became insolvent last summer.

The plan involves auctioning a small sample of assets from the SIV to determine a market price. The rest of the assets would be sold at the market price into a new vehicle funded by holders of senior paper in the SIV. The senior creditors would also be given the opportunity to cash out.

Cheyne Finance, worth around $7bn, received 90% of its funding from senior notes, with the remaining 10% split between mezzanine and equity investors.

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