Restructuring SIVs

There is an interesting article at the Financial Times Online about how Deloitte & Touche is helping Goldman Sachs restructure their SIVs without direct help from the US Treasury supported SuperSIV scheme for purchasing SIV assets. The proposed restructuring is too involved to detail here (see the article), but the advantage to Goldman and others is that it would allow these firms to keep the assets long enough to hopefully avoid fire sales prices. The Deloitte/Goldman model is expected to be rolled out for orphaned SIVs within Goldman (those in receivership that were unable to be restructured quick enough), and could be used as a model for other companies.

In short, the principle used to restructure the SIVs is similar to those used to restructure debt-laden companies. First, the claims of the junior creditors are wiped-out allowing the senior creditors to control the assets. The assets are then reorganized into a new framework, which may involve additional restructuring and recapitalization. The main difference lies in the valuing of the assets, which is more difficult given that it is hard to get creditors to agree on valuations. While not transferable to all companies, if successful the structure could help to reduce the burden on the government and taxpayers, while also allowing firms to eventually sell assets for more reasonable prices.