The Federal Reserve Bank of New York announced the sale of the rest of the securities in the Maiden Lane II LLC (ML II) portfolio.
The Fed created ML II in 2008 to buy RMBS from the securities lending portfolio of various American International Group (AIG) subsidiaries. This was done as part of the insurer's government bailout in 2008.
In this latest sale, the New York Fed sold assets with a current face amount of $6.0 billion from ML II through a competitive process to Credit Suisse. This is the final sale from the portfolio.
The deal was prompted by an unsolicited offer from Morgan Stanley to BlackRock Solutions, the investment manager for ML II, to buy the assets.
The five broker dealers included in the latest competitive process were Barclays Capital, Credit Suisse, Merrill Lynch, Morgan Stanley, and RBS Securities. The broker dealers were selected based on the strength of each of their recently submitted offers to buy ML II securities.
This will be the third sale of ML II assets this year. The first two were held on Jan 19 and Feb 8.
In the last sale, Goldman Sachs beat four other firms, Credit Suisse, Barclays Capital, Morgan Stanley and RBS Securities.
The Feb 8 sale was prompted by an unsolicited offer from Credit Suisse, which won the first competitive process on Jan. 19.
The sale's completion will result in the full repayment of the $19.5 billion loan extended by the New York Fed to ML II. It will also generate a net gain for the benefit of the public of roughly $2.8 billion, which includes $580 million in accrued interest on the loan.
“The completion of the sale of the Maiden Lane II portfolio has resulted in significant gains for the public and marks an important milestone in the wind-down of the extraordinary interventions necessitated by the financial crisis,” said William Dudley, president of the New York Fed.
The net proceeds from this sale along with proceeds from previous sales, together with the cash flow the securities generated while held by ML II, allow the full repayment of the New York Fed’s senior loan plus interest.
Today's sale also pays off the junior AIG deferred purchase price plus interest as well as the offer residual income, which will be distributed according to the ML II agreements.
Consistent with its March 2011 announcement about the disposition procedures for ML II, which allowed for the types of reverse inquiries that Morgan Stanley made, the New York Fed directed BlackRock to conduct a sale via a competitive process.
Net proceeds from the sale will be reported as part of the portfolio’s normal reporting schedule on April 16. The New York Fed will also offer further information about all ML II deals such as an account showing the acquirer and the price paid for each individual security on May 29.