Rhinebridge backers set to recover 55% of investment


THE BACKERS of debt fund Rhinebridge, one of the first Dublin-based casualties of the credit crunch in international markets, are set to recover some 55 per cent of their $1.1 billion (€713.51 million) investment under a distribution and partial redemption finalised yesterday by the receivers of the fund.

Receivers Deloitte & Touche said last night they had concluded the sale of the portfolio of debt securities held by the collapsed fund, which defaulted last year. Senior investors in its commercial paper stand to recover 55 per cent of their money, but junior-ranking creditors will receive nothing.

Rhinebridge was set up as a structured investment vehicle (SIV) in Dublin by Dusseldorf-based commercial lender IKB Deutsche Industriebank.

Such funds, held off the balance sheet, typically raised short-term debt to invest in longer-term securities but they were caught out by the global liquidity squeeze, which deprived them of access to funding. As a result, they are disappearing as an investment option.

Serious funding troubles at Rhinebridge last year led to a bailout of IKB by German state bank KfW, with help from Deutsche Bank and Commerzbank.

Having made an initial cash distribution of $134.18 million to senior investors in February, Deloitte & Touche said in a filing to the Irish Stock Exchange that senior creditors would receive $351 million from an auction last week of Rhinebridge's assets. They also stand to receive a future $14 million distribution from cash held in the company.

Following the auction, the rest of the fund's assets transferred to investment bank Goldman Sachs or other senior investors.

Under the restructuring, investors could choose to cash out or swap their investments for pass-through notes, gaining a stake in a new investment vehicle set up by Goldman Sachs. That vehicle held the assets from Tuesday this week until yesterday, when the assets were transferred to the investors who did not cash out.

"Taking into account today's portfolio sale distribution, the initial distribution on February 26th, 2008, and the planned future distribution, the receivers estimate that holders of USCP or ECP notes will recover approximately 55 per cent of the total redemption price of each USCP and ECP note," the filing said. "The receivers are not able to provide a percentage recovery in respect of the aggregate senior obligations, given the differing interest rates applicable to senior creditors."