Citigroup provides $7.6 billion to SIVs

Citigroup has provided $7.6 billion to seven structured investment vehicles it advises as part of $10 billion in committed liquidity, according to Financial Week.
According to a filing with the Securities and Exchange Commission, the liquidity was provided “at arm’s-length commercial terms” and the $7.6 billion was drawn as of Oct. 31.
Citigroup indicated that it hasn’t consolidated the assets of the SIVs on its balance sheet and that it “will take no actions that will require the company to consolidate the SIVs.”
Citigroup officials weren’t available for comment.
SIVs are special purpose investment companies that sit off balance sheet. They invest in highly rated long-term assets and fund their investments by issuing shorter-term debt, such as commercial paper and medium-term notes.
Beginning in July, Citigroup’s SIVs sold more than $19 billion of assets, bringing the combined assets of the seven SIVs to $83.1 billion as of Sept. 30, 98% of which are fully funded until the end of the year.
Citigroup said that it doesn’t own any equity positions in the SIVs, which don’t have any direct exposure to subprime assets and have about $70 million of indirect exposure to subprime assets through collateralized debt obligations rated AAA through credit enhancement.
Citigroup noted that all SIVs, including those advised by the bank, have experienced difficulties in refinancing maturing commercial paper and medium-term notes because of the reduced liquidity in the market for commercial paper.
For instance, one of Citigroup’s largest SIVs, dubbed Beta, held $19.3 billion in assets as of Sept. 30, according to the bank, down from $22.4 billion as of Sept. 17, according to data provided by Fitch Ratings.
Its commercial paper funding dropped to $2.6 billion from $3.94 billion in that same period, while medium-term note funding held stable at about $15.7 billion.
Last week, Citigroup said it wrote down as much as $11 billion of subprime debt, prompting the resignation of CEO Charles Prince on Nov. 4.