BNP Paribas Unit Suspends Funds Amid Credit-Market Troubles
By NICOLAS PARASIE
August 9, 2007 5:52 a.m.
PARIS -- BNP Paribas Investment Partners, a unit of French bank BNP Paribas Thursday said it temporarily suspended three of its funds as a result of a current lack of liquidity in the market.
The market in these types of investment has come under pressure recently because of problems in the subprime mortgage market.
"The complete evaporation of liquidity in certain market segments of the U.S. securitization market has made it impossible to value certain assets fairly regardless of their quality or credit rating," BNP Paribas said in a statement.
As a result, the bank said it would suspend three funds, Parvest Dynamic ABS, BNP Paribas ABS Euribor and BNP Paribas ABS Eonia, which are in total valued at around €1.5 billion ($2.07 billion), a spokesman for the group said. All funds combined at BNP Paribas Investment Partners are worth more than €350 billion.
"The situation is such that it is no longer possible to value fairly the underlying US ABS assets in the three above-mentioned funds" and "therefore unable to calculate a reliable net asset value, NAV, for the funds," the company said.
The news sent further shock waves through an already sensitive money market. High-yield currencies, which started the day higher, turned lower following the BNP Paribas announcement, with low-yielders such as the yen reaping the benefit.
"Who knows where the subprime story is going to pop up again," said Adam Cole of RBC Capital Markets. He said any losses in the Australian and New Zealand dollars should be limited for now as are investors still waiting to buy on the dips.
BNP Paribas spokesman Jonathan Mullen said "it is impossible to price assets in the funds because there is a lack of liquidity." "Investors can't do anything now, but it's in their best interest," he added.
When the bank posted second-quarter results last week, Chief Executive Baudouin Prot said the bank would be virtually untouched by the plummeting valuation of some subprime mortgage portfolios in the U.S. because it has little exposure to that market. "It was a deliberate choice," he said. "For many years, we didn't get the revenue, now we don't get the problems."
Earlier this week, WestLB Mellon Asset Management, the asset-management joint venture of German state bank WestLB AG and The Bank of New York Mellon Corp., said it is suspending the issuing and redemption of shares in an asset-backed securities fund.
"In the scheme of BNP Paribas nothing has changed -- we have minimal impact from the subprime market," Mr. Mullen said.
The valuation of these funds and the issue, redemption process will be resumed as soon as liquidity returns to the market, BNP said.
BNP Paribas shares lost €2.50, or 2.9%, to €82.50, in an overall weaker market in Paris morning trading.
Write to Nicolas Parasie at nicolas.parasie@dowjones.com1 |
