Selling a stressed position without signalling distress.

The situation

A foreign bank needed to exit a non-convertible debenture exposure on its India book. The underlying credit had deteriorated and the position was no longer one the bank could hold to maturity.

The complexity

A stressed position sold into a thin market prices off the most reluctant buyer, and a wide circulation would have signalled distress to the borrower's other lenders. The universe of buyers able to hold a stressed debenture of this size was small.

The structure

The exposure was downsold through a controlled process to a limited approach set selected on holding capacity rather than reach, with diligence material prepared to answer the recovery question directly rather than to market the credit.

The outcome

The bank exited the position and removed the exposure from its India book.

Described generically. Client identity, counterparty and transaction terms are confidential.