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SunTrust Discloses Backing of STI Classic Funds, "Not a Precedent". Bloomberg reports that SunTrust Bank has purchased, at amortized cost plus accrued interest, $1.4 billion in securities "from two of its money-market funds to protect investors from possible losses". (SunTrust previously had requested an SEC "no-action" letter to provide a letter of credit to its Trusco Capital Management subsidiary to back STI's holdings of SIV Cheyne Finance). The company "expects to take a pretax writedown of $225 million to $250 million" in Q4 says today's 8-K filing. This extremely conservative number estimates losses on troubled SIV holdings of 16-18%; Crane Data guesses that eventual losses will range from zero to 4%. The filing also discloses a loss related to an enhanced cash product, SunTrust Core Cash. This "institutional cash fund" was shut down last quarter and investors "were paid $1.00 per share in cash". SunTrust says it "does not have a contractual or implicit obligation to take this action or provide additional support for the Funds" and "does not anticipate" additional issues" in its $10.2 billion STI Classic Prime Quality Money Market Fund and its $4.3 billion STI Classic Institutional Cash Management Fund. "This action should not be considered a precedent for future actions or commitment by the Company to provide additional support," the 8-K adds. The STI Classic funds are the 22nd largest money fund family with $24 billion in assets, according to Money Fund Intelligence XLS.
