BusinessBusiness RecoveryCreditors hail the salvation of structured investment vehicles

Creditors hail the salvation of structured investment vehicles

Has Deloitte partner Neville Khan cornered the market in rescuing troubled SIVs?

‘He’s cornered the market!’ that’s the view from professional colleagues of
Neville Kahn, the Deloitte receiver lauded as being the saviour of a raft of
structure investment vehicles that went into administration or encountered
turbulence as a result of the credit crisis.

Last week, the news emerged that Kahn, in partnership with Goldman Sachs, had
found a way of restructuring the $7bn (£3.5bn) Cheyne Finance SIV in a move that
was heralded as a method that could be used across other vehicles.

The national papers wrote the story up as beginning a new stage in the credit
crisis and it looked very much like creditors were set to begin receiving some
of their money back.

As for Kahn, he accepted that he may well have ‘cornered the market’ and that
the deal would prove a model for others SIVs, including the other three still on
the books of Deloitte as receiver.

‘The thing is that the market has been seeking clarity about SIVs and in this
deal there is a structure that really works,’ he said.

SIVs do business via borrowing money by issuing short-term securities at low
interest, and then lending that money by buying long-term securities at higher
interest. They make a profit for investors from the difference between the two
interest rates. SIVs hit the skids as the credit crunch bit by failing to
attract fresh investment because of fears about the underlying assets held by
the vehicle.

But is this a lucrative new line for business recovery experts? Certainly for
Kahn the coverage generated by the Cheyne deal will mean he will attract new
work.

‘What it gets is fantastic profile,’ says one industry observer. ‘And what
that does is pull in work providing advice about SIVs that are potentially
damaged or impaired.’
And given that many believe Kahn could charge up to £600 per hour, and used
specialists from across disciplines within Deloitte, the eventual fees could
amount to hundreds of thousands of pounds or, as some fellow business recovery
experts believe, perhaps as much as a million.

Are there opportunities for other players, though? Observers believe many
SIVs have Big Four only clauses in their constitutions, which means restricted
opportunities.
However, some SIV work is being picked up elsewhere. Begbies has taken on the
administration of Carlyle Capital Corporation, said to hold $22bn worth of
assets. That should place the firm in a position to bid for advisory work too.

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