The U.S. Department of the Treasury, in a joint statement with the Federal Reserve and the Federal Deposit Insurance Corp. (FDIC), announced today the launch of the Legacy Securities Public-Private Investment Program (PPIP), which is part of the government’s Legacy Securities Program.
Under this program, the Treasury will invest up to $30 billion of equity and debt in public-private investment funds (PPIFs) established with private sector fund managers and private investors for the purpose of purchasing legacy securities.
Initially, PPIP will participate for CMBS and non-agency RMBS.
To qualify for purchase by PPIP, these securities must have been issued prior to 2009 and must have had a ‘AAA’ rating.
The following firms are qualified to participate as fund managers in the initial round of the program:
AllianceBernstein and its sub-advisors Greenfield Partners and Rialto Capital Management;
Angelo, Gordon & Co./GE Capital Real Estate;
Blackrock;
Invesco;
Marathon Asset Management;
Oaktree Capital Management;
RLJ Western Asset Management;
The TCW Group; and
Wellington Management Co.
Each of these nine participants will raise $10 billion of eligible assets under management.
These pre-qualified PPIP firms are required to invest a minimum of $20 million of its own capital into the PPIF to begin purchasing eligible assets.
Each PPIP fund manager will receive equal allocation of capital from the Treasury.
The Treasury expects a first PPIP closing in early August, and will continue to negotiate final documentation with each pre-quaified fund manager.
Finally, the Treasury statement said the FDIC remains committed to the PPIP loan program and will be prepared to offer it in the future as needed to cleanse bank balance sheets and bolster their ability to support the credit needs of the economy.
The FDIC also said it will continue to work on ways to increase the utilization of this program by open banks and investors.
