The Federal Reserve Bank of New York has sold $7.014 billion worth of assets from its Maiden Lane II (ML II) portfolio via a competitive process to Credit Suisse.
The Fed kept the market guessing prior to this sale. Walter Schmidt, senior vice president in structured product strategies at FTN Financial, called the $7 billion bid list from ML II one of the market's "worst-kept secrets."
He said that although everyone in the market had been talking about the sale, there was no official word on the NY Fed's Web site. He added that the $7 billion figure roughly corresponds to the entire $6.656 billion that was listed as "Loan Balance with Accrued Interest" in ML II on the NY Fed's Web site.
The Fed said the transaction was prompted by an unsolicited offer from Goldman Sachs to BlackRock Solutions, which is ML II's investment manager this month to buy a portion of ML II assets.
According to the Fed, consistent with its March 2011 announcement about the disposition procedures for ML II that allowed these types of reverse inquiries, the New York Fed directed BlackRock to conduct a sale through a competitive process.
The four broker-dealers included in the competitive process were Barclays Capital, Credit Suisse , Goldman and Merrill Lynch. The firms were selected because they had previously expressed their interest in large parts of the portfolio and/or their participation in the ML II bid list process conducted last year.
The bank decided to move forward with the deal only after making sure that the winning bid represented good value for the public. This transaction substantially reduces the ML II portfolio and loan at a desirable price. Additionally, the transaction is consistent with ML II’s stated investment objective.
"I am pleased with the strength of the bids and the level of market interest in these assets," said William C. Dudley, president of the New York Fed.
Net proceeds from the sale will be reported as part of the portfolio’s normal reporting schedule on April 16, 2012.
For ASR's previous coverage of the sale, please click this link.