HSBC says plans to launch 3-Tier SIV

By David Wigan

LONDON, Jan 19 (Reuters) - HSBC (0005.HK) (HSBA.L) is planning to launch its second structured investment vehicle (SIV), in an unusual three-tier structure aimed at attracting a wider range of investors, the bank said on Friday.

Named Asscher the SIV will have the ability to issue triple-A rated senior notes, single-A mezzanine notes and triple-B rated income notes. All of the ratings are from Standard & Poor's.

"This is a low funding high asset quality vehicle with refunding risk," said Dominic Swan, head of structured investment vehicles at HSBC. "Investors get a highly rated security that pays slightly better than banks or a share of the profits generated depending on the exposure they choose."

HSBC is interviewing a dealer group for the transaction, Swan said.

A SIV is a type of investment company which generates returns by purchasing high-grade fixed-income instruments and funding itself with low-cost short-term senior debt instruments.

Similar to CDO structures, SIV funding is split into tranches of senior and subordinate debts with residual equity funding.

The $300 billion SIV sector is dominated by a few banks including Citigroup, HSBC, Dresdner, Standard Chartered and West LB. Citigroup introduced the three-tier format with its Sedna Finance SIV, launched in 2004.

Swans estimates that about 10 percent of Asscher's portfolio will be invested in triple-A cash CDOs, with about 40 percent in residential mortgage-backed securities and the rest in student loan asset-backed securities, credit card-backed notes and bank paper.

The programme is open-ended with the final size depending on investor demand. Cullinan, the previous SIV from HSBC has grown to over $30 billion in 18 months.