Troubled financial firm Structured Credit Company (SCC) has raised $125 million (€92.75 million) in fresh capital from its backers in a last-ditch effort to rescue the business, which has liabilities of $438 million.
In an unusual move yesterday, the High Court placed the firm in examinership and rescinded the appointment of a provisional liquidator. The development followed an application to Mr Justice McCarthy from the directors of SCC, which has fallen victim to a deterioration in the value of credit securities on international markets in the wake of the subprime mortgage crisis in the US.
Shareholders in SCC include private equity firms Aquiline and Pacific Corporate, Québec group la Caisse, the investment banking arm of Crédit Agricole, and US mortgage lender Triad Guaranty.
The company is in the wholesale financial business, taking on the risk of credit defaults on securities held by counterparty firms.
It does business with some of the world's largest investment banks - including CitiGroup, UBS, Barclays, Deutsche Bank and Merrill Lynch - and underwrote just under $5 billion in credit in the 12 months to June, its first year of operations.
With US subprime defaults increasing the risk implicit in all asset-backed securities, SCC suffered a rapid call for increased collateral from its counterparties in recent weeks.
It emerged in court yesterday that its notional liabilities had increased from $55 million in early July to some $438 million today, significantly higher than the $350 million mentioned in court last Friday. The company has posted collateral of $175 million, capital of hand of $15 million and notional debt of $248 million.
SCC was already in the throes of formulating a restructuring plan when Japanese banking giant Nomura went to the High Court last Friday to put the firm in liquidation.
SCC was not represented at that hearing.
While two previous proposals were rejected by counterparties, there is agreement in principle to the latest plan from three counterparties: CitiGroup, Natixis and Calyon. Responses are pending from another five counterparties but, four others - Nomura among them - have indicated they will not participate.
The case comes before the court again on Friday. SCC directors told the judge yesterday that they want to restructure the business by way of a scheme of arrangement.
"At present the company's significant shareholders have indicated that a sum of up to $125 million is available to be invested by way of new equity in the company, provided a satisfactory restructuring of the company's financial position is attained through a scheme of arrangement," they said in an affidavit.
