Credit firm collapses as volatility in market sends liabilities up by 7,000%

The liabilities of an Irish player in the provision of credit securities to financial institutions have mushroomed by 7,000 per cent in the past four weeks due to the current volatility of the global credit markets.

Barrister Bernard Dunleavy told the High Court yesterday that the total collateral liabilities of Dublin-based Structured Credit Company (SCC) amounted to $5 million (€3.7 million) only several weeks ago, but they had since spiralled to $350 million.

Nomura International plc, of St Martin's le Grand, London, which is owed more than $48 million by SCC, succeeded in having Dublin chartered accountant Simon Coyle, of Mazars, Harcourt Road, appointed provisional liquidator of SCC.

Mr Dunleavy, counsel for Nomura International, told Ms Justice Mary Irvine that SCC had assets of only $15 million to meet liabilities of $175 million.

Steven Marshall, a derivative trader with Nomura International, told the court SCC provided credit security products globally and in the US, and some of its exposures were linked to the US subprime mortgage market, which had been notably volatile recently.

The company's exposure to its creditors had grown at an exponential rate to the point where, having posted $175 million by way of collateral, it had been left with funds on hand of only $15 million to meet liabilities of $175 million. He said SCC, despite having continued to provide credit protection to some dealers, was insolvent and could not pay its debts as they arose.

Nomura International had made demands for collateral on SCC but had not been paid on foot of them.

Mr Marshall said that, since August 3rd, Nomura International dealers had daily phone-calls with directors of SCC and had been told on a number of occasions that SCC did not have sufficient funds to discharge the money owing to Nomura Inter-national.

He said substantial prejudice might result to Nomura Inter-national and to the general body of SCC creditors if a provisional liquidator was not appointed.

Judge Irvine said she was satisfied the petitioner, Nomura International, was owed $48 million and that SCC had funds of only $15 million to meet liabilities of $175 million.

She appointed Mr Coyle as provisional liquidator with power to take possession of SCC's assets along with other powers necessary for the orderly winding-up of the company.