After Much Ado,
PPIP Gets Under Way
News Wrap continued from page 16
After a longer-than-expected ramp-up
time, the Treasury Department’s plan
to deal with toxic assets has closed on
five deals. Invesco Ltc, TCW Group,
BlackRock, Wellington Management Co.
and AllianceBernstein LP each closed
ment initiative. Only five out of the nine
asset managers Treasury selected for the
program have raised the necessary equity.
Also, there are many in the industry that
had hoped to see Treasury implement
its first, larger scale version of the PPIP.
“Right now the program could be as a
large as $40 billion,” Smith says. “But that
is only a fraction of what it originally was
supposed to be.”
More commitments are expected from the other
asset managers
selected to participate in the program. With PPIP
clearly underway now, the next big question is whether—and at what price—
holders of these assets will be willing to dispose
of them.—Erika Morphy
Now that the financing is in place, the next
pieces will be convincing asset holders to
sell—and to fix a price for the market.
so-called public-private investment funds
with $500 million of committed equity
capital from private investors.
Firms that are partnering with the fund
managers include Atlanta Life Financial
Group, through its subsidiary Jackson
Securities, Muriel Siebert and Co. and the
Williams Capital Group.
Collectively, Invesco and TCW have
closed on $1.13 billion of private-sector
capital commitments, matched 100% by
the US Treasury—for a total equity capital
commitment of $2.26 billion. Treasury will
also provide debt financing up to 100% of
the total capital commitments, representing $4.52 billion of total equity and debt
capital commitments.
Meanwhile, BlackRock, Wellington
Management and AllianceBernstein
raised commitments totaling $1.94 billion.
Treasury is now matching that amount,
as well as providing debt financing. The
total purchasing power will be $7.74 billion. Altogether, this activity translates
into $12.27 billion in purchasing power
for so-called legacy assets—the polite term
for underwater or toxic assets now—in the
private sector.
“This is good news,” Kevin Smith, principal with Blackwell Advisors in Rockville,
MD, says. “With the government match,
the managers have significant purchasing
power,” he notes. It is integral that toxic
assets start to move off of banks’ balance
sheets, and PPIP has been viewed as the
main vehicle to do that. Now that the
financing is in place, the next pieces will
be convincing asset holders to sell—and
to fix a price for the market, Smith says.
Despite the successful closing of these
deals—along with promise of more to
come by Treasury—critics have plenty
to pick over with this particular govern-
Banks Growing Bullish
On Loan Dispositions
Banks are growing more assertive in managing, resolving and selling troubled loans
and other real estate they have taken back
and held in their own portfolio. So says
Michael Cain, managing director of asset
sales and advisory for San Diego-based
Douglas Wilson Cos., says that some banks
“are beginning to aggressively move assets
in combination with raising capital to
improve their capital ratios and position
themselves to start lending again.”
Cain’s team at Douglas Wilson has been
hired for asset management and ultimate
disposition of several substantial portfolio
projects for a number of regional and
national banks. He notes that one of the
banks that Douglas Wilson is working with
recently hired the firm to place a small
loan balance pool out in the market. “We
spent extra time making sure the valuation was accurate, and marketed the pool
to a smaller but targeted audience,” Cain
says. Because of that, he says, the bank has
received multiple offers within a week.
According to Cain, who witnessed the
last real estate downturn, “There’s plenty
of equity out there but not everyone is convinced we have seen the bottom.” Buyers
need to know that the valuation they’re
seeing offered is accurate, and backed by
an experienced third party, he says.
Cain, who has 25 years of experience
with real estate lenders, financial institutions and real estate companies, says that
banks will find it difficult to sell these assets
as one-offs: “These loans need to be realistically underwritten, bundled, pooled and
sold in order for banks to grow and lending
to be fully revived,” he says.
To get the most value from these banks’
loan portfolios, Cain’s team at Douglas
Wilson reviews the pool in detail, recommends how to group assets together for the
best execution, and creates an implementation plan for handling that loan book. Cain
advises that banks need to begin developing
strategic plans with a focused approach
to lending profitably. “Otherwise, equity
investors have no interest in investing in a
deteriorating loan portfolio without a plan
to generate future earnings for shareholders,” he says.—Bob Howard ◆
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