PUBLIC-PRIVATEINVESTMENT PROGRAM (PPIP):Will it Ever Arrive or Will RTC-Type Asset Sales Programs Return?By Holland & Knight LLPPresentation by Lawrence J. Wolk, Esq.Partner - Holland & KnightFormer Assistant General Counsel – Resolution Trust Corporation/Federal Deposit Insurance Corporation.June 16, 2009
Lawrence J. Wolk
Partner, Holland & Knight (Washington DC and New York)
Lawrence J. Wolk is a partner in the New York and Washington, D.C. offices of Holland & Knight LLP. Mr. Wolk practices in the real property area, emphasizing public and private sector transactions and commercial real estate finance as well as single-and multi-asset, multi-state acquisitions, mortgage financing and sales. This practice has included the negotiation and documentation of public/private partnership transactions, construction, permanent, and multi-state loans, sales, acquisitions, and other public and private development and projects.
From 1992 to 1995, Mr. Wolk served as the Assistant General Counsel at the Resolution Trust Corp., the senior-most real estate legal position within the agency. Mr. Wolk had senior legal responsibility for the disposition of billions of dollars worth of real estate-related assets.
Jose “Joe” Sirven – Partner, Miamit: 305-789-7784 e: [email protected]
Mr. Sirven has practiced in the corporate, mergers and acquisitions, banking, and international fields for over 25 years. He has represented large publicly owned corporations, global and regional financial institutions, privately held entities, and governments in connection with a variety of business issues involving nearly every country in Latin America and the Caribbean and throughout Europe and Asia.
Steven B. Nesmith – Partner, Washington DCt: 202-457-5908 e: [email protected]
Mr. Nesmith is a Partner in the firm's Public Policy & Regulation Group. Mr. Nesmith served as Assistant Secretary for Congressional and Intergovernmental Relations in the U.S. Department of Housing and Urban Development. He was a Sub–Cabinet member and principal advisor to the Secretary, Deputy Secretary and senior staff on legislative affairs, regulatory issues and policy matters affecting Federal, state and local governments, and public and private industry groups. As a senior Administration Official, he also served as a member of the President’s Leadership Team.
Kerry S. Kehoe – Partner, Bostont: 617-854-1451 e: [email protected]
Mr. Kehoe is a member of the firm's Business Law Department and concentrates his practice in insolvency matters and corporate finance transactions. Mr. Kehoe has represented debtors, secured creditors, trustees, and creditors' committees in bankruptcy proceedings; and lenders and borrowers in out-of-court workout and restructurings. In corporate finance transactions, Mr. Kehoe has represented financial institutions and borrowers.
Suzanne E. Gilbert – Partner, Orlandot: 407-244-1142 e: [email protected]
Ms. Gilbert practices in the areas of business and commercial litigation, real estate litigation, and bankruptcy and creditors' rights. Ms. Gilbert has experience representing clients in commercial disputes in federal, state and bankruptcy courts. A large portion of Ms. Gilbert’s practice involves real estate litigation, including contract disputes, boundary disputes, title issues and mortgage fraud. Additionally, she has represented financial institutions and other entities in a variety of matters, including workouts, lender liability claims, fraudulent transfers, and preferential transfer actions. Ms. Gilbert has represented both debtors-in-possession and creditors in Chapter 11 and Chapter 7 cases.
What is PPIP?
A $500 billion to $1 trillion plan to purchase Legacy Assets
Which government agencies are involved?
The U.S. Treasury Department (Treasury) in conjunction with the Federal Deposit Insurance Corporation (FDIC) and the Federal Reserve
How will PPIP be funded?
Equity: $75 billion to $100 billion in Troubled Assets Relief Program (TARP) capital supplemented by capital from private investors
Debt: Purchase money financing for acquisition of assets by PPIF is guaranteed by FDIC (Legacy Loans Program) and provided by Treasury (Legacy Securities Program)
What are Legacy Assets?
Why is PPIP needed?
Banks hold Legacy Assets which create uncertainty around their balance sheets, compromising their ability to raise capital and to increase lending.
What are PPIP’s primary objectives?
PPIP’s Three Basic Principles
1. Leveraging the Impact of the Government Funds
Government (guaranteed) financing and co-investment of equity by Treasury and private investors will leverage government resources and incentivize private investment.
2. Sharing of Both Risk and Profits With Private Investors
PPIP enables private investors to invest. Private investors’ loss is capped at their equity investment. Private investors will share in profits along with the government.
3. Private Sector Sets Pricing
Private investors will bid at auctions to establish the price of the asset pools and securities.
Funding the Acquisition of Assets
Equity: Treasury capital and private investor capital will be invested proportionately at the same time in each PPIF
Debt: Each PPIF will issue debt financing payable to the Participant Bank guaranteed by FDIC
Passive Private Investors
Participant Banks/Eligible Assets
Procedure for Purchasing Eligible Asset Pools
FDIC Oversight and Implementation
Procedure for Purchasing Eligible Asset Pools
Purchase Money Debt
FDIC will determine terms of the financing to be guaranteed by FDIC
Financing will be non-recourse
FDIC debt guarantee will be secured by the Eligible Assets
Debt will initially be placed at the Participant Bank, which will have the right to resell the debt
Sharing the Responsibility
Treasury will oversee and manage its equity investment in each PPIF
Expanding TALF for Legacy Securities
Legacy Securities PPIFs
Qualified Fund Managers:
Comments received by FDIC in connection with the Legacy Loan Program have provided FDIC with a better sense of the concerns of the “marketplace”
What size pool – supersized for Wall Street or downsized for Main Street?
Asset Management Concerns
Investors must realize that programs which involve taxpayer funds uniformly bring with them government involvement and regulations
What does the immediate future hold?
Structure of loan sales of closed-bank assets to be held over the next six months by the FDIC
Other opportunities to participate in government programs