Five firms raise $3bn to buy toxic assets

Five firms have so far raised $3 billion for investments in “toxic” bank assets, ratcheting up the total purchasing power of the US government's Public-Private Investment Program to more than $12 billion.

The US Treasury said Monday that about $2 billion has been raised by AllianceBernstein, with its sub-advisors Greenfield Partners and Rialto Capital Management, as well as BlackRock and Wellington Management. Those firms join Invesco and the TCW Group, which together raised about $1.1 billion in September.

In total, the five firms have raised $3.07 billion, the government has providing matching equity of $3.07 billion and $6.13 billion in debt, bringing the total purchasing power of the programme to $12.27 billion.

Other qualified firms are expected to hold initial closes on their funds throughout October, the Treasury said in a statement. These firms include Oaktree Capital Management, Marathon Asset Management, RLJ Western Asset Management and a partnership between Angelo Gordon and GE Capital Real Estate.

PPIP is meant to take bad assets – most of which are mortgage-related – off of banks' balance sheets. The programme was originally envisioned to generate $1 trillion of purchasing power to re-invigorate the frozen credit markets, but the plan has been scaled back and now looks likely to generate around $40 billion.

As part of the programme, small, veteran, minority and women-owned firms were qualified to partner with the pre-selected fund managers. The firms partnering with the pre-qualified firms that have completed initial closings include Advent Capital Management, Altura Capital Group, Utendahl Capital Management Atlanta Life Financial Group through subsidiary Jackson Securities, Muriel Siebert & Co. and The Williams Capital Group.