The US Treasury has selected several private equity and private equity real estate firms to participate in its $30 billion effort to unfreeze the credit markets and stop the spread of the financial crisis.
Among those taking part in the initial round of the Public-Private Investment Program (PPIP) include a partnership of Angelo Gordon and GE Real Estate, Oaktree Capital Management, Invesco and Marathon Asset Management among others.
The Treasury will partner with private investors to buy real estate loans on bank balance sheets and securities backed by loan portfolios.
The programme is split between purchasing legacy loans and legacy securities backed by real estate loans. Under the loans portion, private investors will be able to purchase eligible loans from participating banks through Federal Deposit Insurance Corporation debt guarantees and co-investments with the Treasury.
Once the assets have been sold, private fund managers will control and manage the assets until final liquidation, subject to FDIC oversight, according to the Treasury.
Those firms chosen to participate in the securities portion of the programme along with Oaktree, Invesco, Angelo Gordon, GE and Marathon, include AllianceBernstein and its sub-advisors Greenfield Partners and Rialto Capital Management; BlackRock; RLJ Western Asset Management; The TCW Group and Wellington Management.
Under the securities programme, the private firms will be provided with co-investment opportunities and debt for the purchase of legacy securities originated before 2009 with a rating of AAA at origination. The selected managers will have a period of time to raise capital for the designated asset classes and will receive matching Treasury funds.
Each pre-selected fund manager will have up to 12 weeks to raise at least $500 million for the programme. The equity capital raised from private investors will be matched by the Treasury. Each manager will also will invest a minimum of $20 million of firm capital into the programme. Upon raising the capital, the firms can start buying the eligible assets. The firms also can use debt raised from private sources, and leverage through the Term Asset-Backed Securities Loan Facility.
The Treasury chose the investment firms from 100 applicants using criteria including the firm’s ability to raise at least $500 million of private capital, a minimum of $10 billion under management and a demonstrated capacity to manage the legacy security PPIP (Public-Private Investment Program) funds to Treasury’s standards.
The government also selected 10 small, veteran, minority and women-owned firms that will have the chance to partner with the pre-selected fund managers, including real estate placement agent Park Madison Partners as well as Advent Capital Management, Altura Capital Group and The Williams Capital Group.