The Treasury, Federal Reserve Board and FDIC released a joint update on the Public Private Investment Program (”PPIP”).  Please find the entire release here (including the conflict of interest rules, FAQs, and letter of intent and term sheet):  http://www.financialstability.gov/latest/tg_07082009.html.  The key development in this update is the announcement of nine asset managers for the Legacy Securities Program (the “LSP”):

• AllianceBernstein, LP and its sub-advisors Greenfield Partners, LLC and Rialto Capital Management, LLC;
• Angelo, Gordon & Co., L.P. and GE Capital Real Estate;
• BlackRock, Inc.;
• Invesco Ltd.;
• Marathon Asset Management, L.P.;
• Oaktree Capital Management, L.P.;
• RLJ Western Asset Management, LP.;
• The TCW Group, Inc.; and
• Wellington Management Company, LLP.

[Read more →]

The staff of the SEC’s Division of Investment Management (the “Staff”) provided no-action assurances to registered funds permitting them to invest in the Term-Asset Backed Securities Loan Facility (“TALF”) under certain conditions without treating the borrowing as a senior security and without requiring the program’s unique collateral arrangement to fully comply with the custody requirements under the Investment Company Act of 1940, as amended (the “1940 Act”). As more fully described in the December 2, 2008 Alert and the May 5, 2009 Alert, the TALF program was established by the Department of the Treasury and the Federal Reserve Board to increase the credit available in the markets by supporting the issuance of various types of asset-backed securities (“ABS”) through the provision of loans to ABS purchasers. Under the program, the Federal Reserve Bank of New York (“FRBNY”) provides non-recourse loans to eligible U.S. holders of certain AAA-rated ABS less a slight haircut (between 5 and 16% of the loan depending on the types of ABS purchased). The loans are secured at all times by the ABS, which are to be transferred to a participating “primary dealer” chosen by the purchaser and delivered at the loan closing to the Bank of New York Mellon (“BNY Mellon”) as administrator and custodian of the TALF program. The non-recourse nature of a loan means that, in the event that a purchaser does not repay a loan, the purchaser will incur no financial obligation beyond the loss of the collateral. [Read more →]

The Federal Reserve Bank of New York announced today that the initial CMBS TALF subscription window will open on June 16, 2009, with funding to occur a week later, on June 23, 2009.  Eligible collateral is currently limited to AAA-rated CMBS issued in 2009, with underlying mortgages originated on or after July 1, 2008.  TALF borrowers can elect either a 3-year or 5-year loan term.  Haircuts and interest rates vary depending on the loan term and remaining average life of the subject CMBS, as shown on the FRBNY’s official announcement:  http://www.newyorkfed.org/markets/cmbs_operations.html

The updated TALF term sheet can be seen here:  http://www.newyorkfed.org/markets/talf_terms.html

The update TALF FAQ can be seen here:  http://www.newyorkfed.org/markets/talf_faq.html

The Treasury Department has released further guidance with respect to the PPIP Legacy Securities Program, as set forth in a press release today (http://www.treas.gov/press/releases/tg82.htm). Treasury has extended the deadline for Fund Manager applications to April 24, 2009, and has made a few clarifications to (a) the interaction between TALF and the PPIP, (b) proposals to encourage participation by small, minority-, women- and veteran-owned businesses, and (c) the role of Treasury debt financing. I also note that the additional FAQ document, which is hyperlinked into the Press Release, contains the following further comment as to PPIP warrants:

What are the terms of the Treasury warrants in a Legacy Securities PPIF?
The terms and amounts of warrants will be determined in part based on the amount of Treasury Debt Financing taken and will be evaluated on a case-by-case basis.

Goodwin Procter’s Real Estate, REITs & RE Capital Markets Group issued a Client Advisory on opportunities for real estate funds in the federal Public-Private Investment Program. The Client Advisory is available on the Goodwin Procter website at http://www.goodwinprocter.com/~/media/EEA83A3624EF49548FD5BE86240DBBD7.ashx.

This week, the U.S. Treasury announced the much-anticipated details of the Public Private Investment Program (”PPIP”) that was introduced in summary form by Treasury Secretary Timothy Geithner last month.1 The program, which is part of the Obama Administration’s broader “Financial Stability Plan,” focuses on the purchase of what were described as “troubled assets” under the Troubled Assets Relief Program (”TARP”), part of the Emergency Economic Stabilization Act of 2008 (”EESA”) enacted last October. Although the TARP was originally proposed as a purchase program for troubled loans and mortgage-backed securities, the Bush Administration applied the first portion of the TARP proceeds toward direct capital infusions into banking institutions. The objectives of the PPIP are much closer to the original objectives of the TARP: to thaw the nation’s credit markets by moving legacy assets off the balance sheets of financial institutions so those financial institutions can expand their lending activities. For more information click here.

In Goodwin Procter’s November 2008 Real Estate Capital Markets Advisor, we presented thoughts on the then current economic environment relating to the commercial real estate industry, focusing principally on mortgage debt. In particular, we summarized the state of the CMBS market, outlining (i) the volume of scheduled maturities over the near term; (ii) the relatively modest delinquency rate on CMBS loans at that time; and (iii) the U.S. Treasury’s then stated intention to use the Emergency Economic Stabilization Act of 2008 to provide capital infusions into the financial system and not to purchase troubled debt. We also provided input on recent changes in the REMIC provisions relating to RMBS pools, and how similar changes could benefit the CMBS market. For more information click here.

Term Asset-Backed Securities Loan Facility

The FRB announced the creation of the Term Asset-Backed Securities Loan Facility (”TALF”), a facility that will support the issuance of asset-backed securities (”ABS”) collateralized by student loans, auto loans, credit card loans, and loans guaranteed by the Small Business Administration (”SBA”). The set of permissible underlying credit exposures of eligible ABS may be expanded to include commercial mortgage-backed securities, non-Agency residential mortgage-backed securities, or other asset classes. [Read more →]