Credit Crunch and ABCP (Video for Clients Only)
BNN - Squeeze Play

August 16, 2007

Janet Tavakoli appeared on BNN's Squeeze Play hosted by Amanda Lang to discuss illiquidity in the ABCP market. Ms. Tavakoli warned that structured investment vehicles known as "SIV-lites" invested in subprime mortgage loan backed assets and unsecured leveraged loan backed assets and were in jeopardy due to a liquidity crisis. Investors did not want their asset backed commercial paper at the levels offered. Any SIV that depends solely on the commercial paper market, as opposed to longer term asset liability matching is vulnerable. Rating agencies failed to take this into account when awarding the initial ratings to these types of SIVs.

The following week, Standard & Poor's, finally acknowledging this inherent vulnerability lowered the ratings on $3.2 billion of debt from selected structured investment vehicles, SIV-lites. S&P downgraded ratings on $3.2 billion of debt of Solent Capital Partners LLP in London and Avendis Group in Geneva. S&P downgraded approximately $254 million of the debt 16 and 17 notches from AAA to CCC+ and CCC.


Clients of Tavakoli Structured Finance also have access to proprietary TSF research, which is not published in any other paid or public forum.

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