French bank Societe Generale is to take $4.3 billion onto its balance sheet in order to bail out its structured investment vehicle (SIV), Bloomberg reports.
Societe Generale’s ratio of Tier 1 assets are predicted to drop by five points as a result of the move. Standard & Poor’s warned three days ago that Societe Generale’s Premier Asset Collateralised Entity (PACE) SIV was in danger of breaching capital tests which would mean a trustee would be appointed to safeguard senior debt holders.
“Due to current market conditions, Societe Generale has extended a liquidity facility designed to fully support the liquidity requirements of PACE, the sole structured investment vehicle that the group sponsors. The group remains confident in the underlying quality of assets acquired,” says the bank in a statement.
Societe Generale’s $103.5 million investment in capital notes dropped in value to $27.6 million this November. The news led to a 1.1% drop in the bank’s shares in Paris trading.