Structured Transaction Overview. FDIC serves as an equity partner in its Receivership capacity for a single or multiple institution transaction. Joint.

Slides:



Advertisements
Similar presentations
Ready for a promotion? If you cant be the big Boss where you work, then maybe its time to promote yourself! When you own the company,youre the big Boss!
Advertisements

Structuring General Partner Transfers During the Compliance Period By: Thomas A. Giblin Nixon Peabody LLP.
Objective Interpret sales contracts and warranties within the rights and law of consumers. LAW OF SALES.
Cash Loan Sales Overview. Loans are competitively marketed and sold in the secondary market via a loan sale advisor. Loans are offered in a variety of.
FINANCIAL MANAGEMENT I AND II
Self-Directed IRAs Investing Retirement Funds in Real Estate.
For rep/agent use only. Not for further distribution.
Courtesy of: The Journey to Your Own Home Made simple… By: Multicultural Marketing Division.
Trade Finance & Factoring
Accounting: The Language
Learning Objectives LO1 Describe the finance and investment process: risk assessment, typical transactions, source documents, controls, and account balances.
Financing Your Business
The Financial Statements
Using Accounting Information
Patty Bartlett Logan County Treasurer / Public Trustee.
Investing Opportunities Using Investment Opportunities as a Means to Increase Individual Wealth.
CHAPTER FIFTEEN Lending Policies And Procedures The purpose of this chapter is to learn why sound lending policies are important to banks and other lenders.
Investing in Bank Owned Real Estate Notes. Bank Owned Real Estate Notes Marketplace Analysis Recently the headlines have indicated that banking institutions.
Introduction to Financial Statements and Other Financial Reporting Topics COPYRIGHT ©2007 Thomson South-Western, a part of the Thomson Corporation. Thomson,
FIN437 Vicentiu Covrig 1 Raising equity capital (see chapter 23 in Berk and Demarzo “ The Mechanics of Raising Equity Capital”) “ The Mechanics of Raising.
The Housing Expenditure. Objectives Discuss the options available for rented and owned housing and whether renters or owners pay more for housing. Determine.
CPE Forum Financing Exports November 9, 2010 Helping you start, grow and succeed.
Business in Action 6e Bovée/Thill Financial Management Chapter 18.
Copyright © 2006 Pearson Addison-Wesley. All rights reserved. 9-1 Chapter (1) An Overview Of Financial Management.
Introduction to Financial Management
Farm Service Agency Guaranteed Loans FSA guaranteed loans provide lenders (e.g., banks, Farm Credit System institutions, credit unions) with a guarantee.
Finding and Selecting a Home.  What Are the Steps for Buying a Home? 1.Determine if you should rent or buy 2.Determine how much you can afford to spend.
CLARKE ADVISORS LLC PRIVATE INVESTMENT BANKING Merger and Acquisition Services Securities offered through Penates Group LLC, FINRA/SIPC (a non-affiliated.
Buying a Home. Renting a House AdvantagesDisadvantages.
1 Chapter 18 Issuing Capital and the Investment Banking Process McGraw-Hill/Irwin Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.
Chapter 5 Money market Dr. Lakshmi Kalyanaraman 1.
Dr. Mohamed A. Hamada Lecturer of Accounting Information Systems
Chapter 1 FINANCIAL MARKETS & INSTITUTIONS
Accounting and Financial Reporting Back to Table of Contents.
CLOSING the Real Estate Transaction D. Zaharopoulos.
Chapter 22 Buying a Home.
Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
12 Accounting for Partnerships and Limited Liability Companies
Neighborhood Stabilization Program (NSP) Update February 16, 2010.
Financial Management Chapter 18. Financial Management Chapter 18.
Understand financial markets to recognize their importance in business. Types of financial markets Money market, Capital market, Insurance market,
FUNDAMENTALS OF CORPORATE FINANCE MGF301 Fall 1998 Vigdis Boasson SUNY at Buffalo
Objective 2.03 Analyze financial and legal aspects of home ownership.
Real Estate Principles and Practices Chapter 16 Investment and Tax Aspects of Ownership © 2014 OnCourse Learning.
Chapter 3 Financial Management Part 2 BCN 4772 Summer 2007.
Financial Markets, Instruments, and Market Makers Chapter 3 © 2003 South-Western/Thomson Learning.
McGraw-Hill/Irwin ©2008 The McGraw-Hill Companies, All Rights Reserved Chapter Sixteen Lending Policies and Procedures.
Self-Directed 401Ks / IRAs Investing Retirement Funds in Real Estate.
Banks Chapter 2 Risk Management and Financial Institutions 2e, Chapter 2, Copyright © John C. Hull 2009.
An Overview of the Financial System chapter 2 1. Function of Financial Markets Lenders-Savers (+) Households Firms Government Foreigners Financial Markets.
Real Estate Principles and Practices Chapter 16 Investment and Tax Aspects of Ownership © 2010 by South-Western, Cengage Learning.
Small Investor Program. MultibankSIP Promote FeatureNoYes Collateral LocationDispersedConcentrated Management Fee0.5% UPB1.0% UPB Small Investor Program.
PRE-PARED BY: AZHAR AHMED 1-1 CHAPTER 4 The Financial Statements.
上海金融学院 1-1 Lecture 3 Investment Banking Basics: The Financial Statements.
© South-Western Educational Publishing Buying a Home.
What does finance mean ?  Finance = f (money)  Money = anything that is generally accepted as payment for goods and services and repayment of.
INTRODUCTION TO FINANCIAL MANAGEMENT Chapter 1. WHAT IS FINANCE? Finance can be defined as science and art of managing money. KEYWORDS FINANCIAL MANAGEMENT.
Azerbaijan Deposit Insurance Fund «Mandate and powers of deposit insurance schemes» 29 April 2014 Azerbaijan Deposit Insurance Fund Mandate.
Role of Financial Markets and Institutions
Warren Reeve Duchac Corporate Financial Accounting 14e Chapter 1 Introduction to Adjusting and Business.
MUTUAL FUNDS INVESTING IN MUTUAL FUNDS What is a mutual fund?
How Do Foreclosure Auctions Work
Investment Management
TREASURY ORGANIZATION AND STRUCTURE
CHAPTER 16 Real Property.
CHAPTER FIFTEEN Lending Policies And Procedures
TREASURY ORGANIZATION AND STRUCTURE
Chapter 11 Sources of Capital
Professor Chris droussiotis
Presentation transcript:

Structured Transaction Overview

FDIC serves as an equity partner in its Receivership capacity for a single or multiple institution transaction. Joint Ventures (Partnerships) between FDIC as Receiver and Private Sector Entity. –Formed as limited liability companies (“LLC”). Used to sell loans and some owned real estate. Introduction to Structured Transactions

FDIC partnerships – continuing relationship. –Up to 7 years for commercial loans. –Up to 10 years for single family loans. LLC Oversight and Reporting. FDIC as Receiver and its partner retain their equity interests in all future cash flows generated by the workout of the assets over time. Introduction to Structured Transactions

FDIC goal - maximize recoveries on failed bank assets and minimize the losses to its creditors. Long term intrinsic value exceeds current depressed market. Past success. Why Structured Transactions?

Structured transactions enable FDIC to: –Retain an interest in the assets. –Transfer day-to-day management responsibility to private sector with a financial interest. –Utilize the expertise of private sector in maximizing returns. –Share in costs and risks. –Create investor opportunities. Why Structured Transactions? (Cont.)

Real Estate secured loans. Commercial Real Estate Commercial / Residential ADC Single Family Residences Performing and Non-Performing. Loans from a single institution or multiple failed institutions. Assets Targeted for Sale

FDIC as Receiver forms a Limited Liability Company (LLC) and conveys loans to the LLC. FDIC as Receiver holds 100% interest in the LLC. FDIC offers to sell an equity interest in the LLC to 3rd party bidder (e.g., 40%). FDIC retains the remaining equity interest in the LLC. How are Structured Transactions Created?

Initial Member (FDIC as Receiver) contributes in part [and sells in part]* the Assets to the Company. –In return, the Initial Member receives: 100% of the equity interest in the Company. Leveraged transaction only, Purchase Money Notes. Private Owner/Manager purchases a portion of the equity interest from the Initial Member for cash at closing (the “Private Owner Interest”). *Leveraged Transaction only Participants in Structured Transactions

–The Private Owner: Newly formed entity (corporation or LLC). Manages the Company (the “Manager”). Selects a Qualified Custodian and Paying Agent – subject to approval of the Initial Member. Selects the Servicer – and enters into a Servicing Agreement between the Manager and the Servicer. –Servicer is qualified as part of the Bidder Qualification Process. –Servicing Fees paid by the Manager from the Management Fee. Participants in Structured Transactions

* Leveraged Transaction All Equity Interest PMN*Assets Custodian/ Paying Agent* Manages Payments* Holds Assets Documents Company, LLC Management Fee Initial Member (FDIC) Cash at Closing Private Owner Interest Servicer Servicing Agreement Private Owner (Manager) Specified Parent Structured Transaction Diagram

–When FDIC offers Seller Financing, bidders may bid to acquire the Private Owner Interest from the Initial Member using either of the following methods: An all-cash offer (the “Unleveraged Structure”) or With Seller Financing (the “Leveraged Structure”) Non-Leveraged vs. Leveraged Transactions Financing/Leverage

$300MM (UPB X Bid%) $150MM (Debt) (excluding guaranty fee) $150MM (Equity) FDIC 60% / Buyer 40% UPB $500 Million Bid % = 60% 1:1 Leverage Price Paid for 40% Equity - $60 Million Structured Transaction Calculation with Leverage

Servicing Transfer Date and LLC Monitoring Begins Closing Date Closing Date 60 Days 48 Hours Earnest Money Deposit Due Earnest Money Deposit Due 1 Week Bid Award 15 Business Days 15 Business Days 2 Days Bid Deadline Initial Bid Deposit Due Initial Bid Deposit Due Preliminary Announcement Sent and Due Diligence Begins 6 Weeks Typical Process Timeline

Preliminary Announcement - sent to pre-qualified prospective bidders. Investor due diligence - review period typically lasts six weeks. Cut-off date – date economic interest in assets passes to the LLC – bidders submit bids on cut-off date balances. Key Events / Dates

Bid Date – deadline for submission of bids. Bid Award Date – transaction is awarded to winning bidder. Earnest Money Deposit Due – typically 10% of purchase price due within 48 hours of award. Key Events / Dates (Cont.)

Closing Date Transaction documents executed – generally 15 business days after award. Servicing Transfer Date FDIC provides limited servicing until loans are service transferred – generally all transfers are completed within 60 days of closing. LLC Reporting Begins after transaction closes and is monitored by Risk Sharing Asset Management. Key Events / Dates (Cont.)

Online due diligence –Imaged loan files –Loan level reports –Data tapes –Asset/Loan Summary Reports (LSR/ASRs) –Site inspections / BPO’s –Title searches –Litigation reports Information/data – updated regularly Due diligence qualification process –$250,000 security deposit Investor Due Diligence

FDIC conducts a sealed bid sale to auction off the equity interest. Structured transactions currently offered with and without leverage and on an all cash basis. Initial bid deposit required – typically $300K. Bidder must be qualified in order to submit bid. Successful bidder offers the highest price for the portfolio and enters into the LLC partnership with FDIC. Sealed Bid Process

Upon receipt of an acceptable bid, FDIC awards the transaction to the winning bidder via a Bid Confirmation Letter, which: –confirms acceptance of bid. –provides earnest money deposit requirements. –sets forth documentation / funding requirements for closing. –schedules the closing date. Closing takes place in person at designated law office. –transaction documents are executed. –payment of purchase price and funding of any specified financial accounts are due. Bid Award / Transaction Closing

FDIC (Initial Member) provides interim servicing through the servicing transfer date (typically 60 days after closing). –Receipt and posting of payments. –Maintenance of records reflecting payments received. Interim servicing protocols established between parties. Loans transferred on a servicing released basis. After the closing date, Manager is involved in credit decisions. Interim Servicing Period