E1bn Dublin Investment Fund on Brink; Henry Paulson: $80Bn Bailout

Daily Mail (London), October 22, 2007 | Go to article overview

E1bn Dublin Investment Fund on Brink; Henry Paulson: $80Bn Bailout


RHINEBRIDGE, a Dublin-listed specialist investment fund with assets ofaround $1.2billion (E1billion) is on the verge of collapse and won't be able torepay its debts.

The fund is owned by German bank,IKBDeutscheIndustriebank AG, and is astructured investment vehicle (SIV) that haslostabouthalfits value thanks to the meltdown in the global sub-prime finance market.

Rhinebridge has suffered what the industry calls a 'mandatory accelerationevent', meaning it has to pay off whatever debt it can now.

IKB's asset management arm determined that the SIV may be unable to pay backall of the debt.

Rhinebridgehad$1.2billion (E1billion) in commercial paper outstanding, according to FitchRatings and has already been forced to stop investing and issuing debt.

The fund which has run into trouble specialises in complex investmentslinked to credit card and sub-prime mortgage debt.

Global ratings agency, Standard and Poor last week cut Rhinebridge's issuerrating to A+ from AAA, its commercial paper rating to A-1 from A-1+ and itsmezzanine capital notes to CCC+ from BB-.

It said it might cut all of the ratings again, making it close to impossiblefor the fund to continue, even if it wanted to.

The company, along with others of its kind, faces a crisis as it borrows fromthe short-term commercialpapermarketto fund purchases of asset-backed securities-inthiscasethe assets (sub-prime loans and mortgages) that are now virtually worthless. …

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