A capital note holder of a SIV usually takes the first loss
on any securities held by the SIV. So if you held a capital note on a $1billion SIV, you would take the first losses to be
realised from sale of assets.
SIV standard for structured investment vehicles. These are companies usually
set up (but not owned) by banks. The purpose of the companies varies but usually involves investing in securities. Certain
types of SIVs for example buy long dated securities and fund these by issuing short term debt. There are many reasons for
a bank to use these structures ranging from lower regulatory capital to lower balance sheet usage.