--Marissa Capodanno
Asset manager Stone Tower Capital will be taking the remaining scraps from its structured investment vehicle, Axon Financial Funding, to public auction June 30 in its second attempt to liquidate the structure since its 2007 default.
The sale comes a year after the initial Axon auction, which didn’t completely disband the SIV. According to bid sheets made publically available by trustee Deutsche Bank, the 2010 sale solicited bids on a total of $9.6 billion in collateral, mostly collateralized debt obligations and mortgage-backed securities.
A second auction was planned in December for the retained debt, but never materialized due to lack of investor interest, according to an official close to the sale. Deutsche Bank documents indicate the current face of the residual debt to be $34 million. The collateral has been divided into two portions: a $23 million transferrable sub-lot, and an $11 million non-transferrable stub piece sub-lot. Public notice of the sale lists Caterina Buonafede at Deutsche Bank and Dan Castaline and Charles Pettinato from Stone Tower as contacts for further information on the sale. All three declined to elaborate beyond what was stated in public documents.
SIVs profit from the spread between short-term debt and long-term structured products. Cayman Islands-based Axon hit the market in the first quarter of 2007, at a time when SIVs were considered attractive structures for alternative investments (TS, 4/3/2007). By November 2007, Fitch Ratings and Moody’s Investors Service downgraded to junk levels the SIV’s senior and mezzanine notes, after having previously assigned them top ratings (TS, 9/21/2007).
Then in September 2010, Fitch included Axon among a throng of 43 defaulted global CDOs on which the agency withdrew ratings. Moody’s had similarly withdrawn its ratings of Axon as of July of 2010.