HSBC 2009 Annual Report Download - page 188

HSBC HOLDINGS PLC
Report of the Directors: Impact of Market Turmoil (continued)
SPEs > SIVs and conduits / Money market funds / CNAV funds
186
Weighted average life of the funding liabilities
Solitaire
Other
SICs
Total
SICs
Total
multi-seller
conduits
Total
SIVs
Years
Years Years
Years
Years
At 31 December 2009
CP funding .................................................. 0.2 0.1 0.1 0.1 n/a
MTN funding .............................................. – 10.3 10.3 – n/a
At 31 December 2008
CP funding .................................................. 0.1 0.2 0.1 0.1 n/a
MTN funding .............................................. n/a 7.3 7.3 n/a 0.1
The majority of CP and MTN funding issued by
the SIVs was repaid in full during 2008 using the
proceeds from the asset sales to the new SICs. The
CP and MTNs matured in early 2009.
HSBC’s maximum exposure
Conduits
Mazarin
• HSBC is exposed to the par value of Mazarin’s
assets through the provision of a liquidity
facility equal to the lesser of the amortised cost
of issued senior debt and the amortised cost of
non-defaulted assets. At 31 December 2009,
HSBC’s exposure amounted to US$13.6 billion
(2008: US$15.5 billion). First loss protection is
provided through the capital notes issued by
Mazarin, which are substantially all held by
third parties.
• In addition, at 31 December 2009, HSBC held
1.3 per cent of Mazarin’s capital notes (2008:
1.3 per cent), which have a par value of
US$17 million (2008: US$17 million), and
a carrying amount of US$0.6 million
(2008: US$0.6 million).
Barion and Malachite
• These SICs are term funded by HSBC,
consequently HSBC’s primary exposure to them
is represented by the amortised cost of the debt
required to support the non-cash assets of the
vehicles. At 31 December 2009 this amounted
to US$10.5 billion (2008: US$11.7 billion).
• First loss protection is provided through the
capital notes issued by these vehicles, which are
substantially all held by third parties.
• In addition, at 31 December 2009, HSBC held
3.76 per cent (2008: 3.53 per cent) of the capital
notes issued by these vehicles which have a par
value of US$37 million (2008: US$35 million),
and a carrying amount of US$2.0 million (2008:
US$1.3 million).
Solitaire
• CP issued by Solitaire benefits from a 100 per
cent liquidity facility provided by HSBC. First
loss credit protection against CP-funded
securities, after any transaction-specific credit
enhancement (as described on page 155) and
retained reserves, is provided by HSBC in the
form of letters of credit with a combined
notional value of US$1.2 billion at 31 December
2009 (2008: US$1.2 billion).
• At 31 December 2009, US$7.6 billion of
Solitaire’s assets were funded by the draw-down
of the liquidity facility (2008: US$2.4 billion).
HSBC is exposed to credit losses on the drawn
amounts.
• HSBC’s maximum exposure to Solitaire is
limited to the amortised cost of non-cash
equivalent assets, which represents the risk that
HSBC may be required to fund the vehicle in
the event the debt is redeemed without
reinvestment from third parties.
• HSBC’s maximum exposure at 31 December
2009 amounted to US$18.4 billion (2008:
US$20.4 billion).
Multi-seller conduits
• HSBC provides transaction-specific liquidity
facilities to each of its multi-seller conduits,
designed to be drawn in order to ensure the
repayment of the CP issued. At 31 December
2009, the committed liquidity facilities
amounted to US$14.4 billion (2008:
US$17.1 billion).
• First loss protection is provided through
transaction-specific credit enhancements, for
example, over-collateralisation and excess
spread. These credit enhancements are provided
by the originator of the assets and not by
HSBC. In addition, a layer of secondary loss
protection is provided by HSBC in the form
of programme-wide enhancement facilities,