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LEGACY SECURITIES PUBLIC-PRIVATE
INVESTMENT PROGRAM
Program Update – Quarter Ended September 30, 2012
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October 17, 2012

OVERVIEW
Introduction
This is the twelfth quarterly report on the Legacy Securities Public-Private Investment Program (“PPIP”). This report
includes a summary of PPIP capital activity, portfolio holdings and current pricing, and program and fund performance.
Treasury expects to provide additional information as the program continues to mature in subsequent quarterly reports.

PPIP Overview
PPIP is designed to support market functioning and facilitate price discovery in the mortgage-backed securities markets,
allowing banks and other financial institutions to re-deploy capital and extend new credit to households and businesses. The
investment objective of PPIP is to generate attractive returns for taxpayers and private investors through long-term
opportunistic investments in Eligible Assets (as defined below) by following predominantly a buy and hold strategy. Under
the program, Treasury originally committed $22.1 billion of equity and debt in public-private investment funds (“PPIFs”)
established by private sector fund managers for the purpose of purchasing Eligible Assets. The fund managers and private
investors have also committed capital to the funds. PPIFs have eight-year terms which may be extended for consecutive
periods of up to one-year each, up to a maximum of two years. To qualify for purchase by a PPIF, the securities must have
been issued prior to 2009 and have originally been rated AAA – or an equivalent rating by two or more nationally recognized
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statistical rating organizations – without ratings enhancement and must be secured directly by the actual mortgage loans,
leases, or other assets (“Eligible Assets”).
Please see page 9 of this program update for a glossary of terms used throughout this document. Additional information on
PPIP can also be found at www.treasury.gov/initiatives/financial-stability/Pages/default.aspx.
Neither this report nor the information contained herein constitutes an offer to sell or the solicitation of an offer to buy any
securities. Any such offer or solicitation with respect to any PPIF may only be made by the applicable fund manager. This
presentation has not been reviewed by any of the fund managers.
The performance-related returns and valuations in this report are calculated using an independent third-party market
methodology and are not official Treasury estimates as reported in the Financial Statements or the President’s Budget.
Furthermore, performance related returns
Furthermore performance-related returns, as used in this report, may differ materially from estimates reported in the
report
Financial Statements or the President’s Budget, which are calculated pursuant to the requirements of the Federal Credit
Reform Act of 1990. Treasury’s Financial Statements and the President’s Budget can be found at
www.treasury.gov/initiatives/financial-stability/Pages/default.aspx and www.whitehouse.gov/omb/budget, respectively.
2

CAPITAL ACTIVITY
Set forth below is a summary of the original equity and debt capital commitments by PPIF. The PPIFs
completed their fundraising and closed on approximately $7.4 billion of private sector equity capital
commitments, which were matched 100 percent by Treasury, representing $14.7 billion of total original
equity capital commitments. Treasury also provided $14.7 billion of debt capital commitments,
representing $29.4 billion of total original purchasing power.
Summary of Original Capital Commitments by PPIF ($ in Millions)
Original Equity and Debt Capital Commitments (1)(2)
Private
Treasury
Treasury Purchasing
Equity
Equity
Debt
Power
$
1,243 $
1,243 $
2,487 $
4,973

Fund
AG GECC PPIF Master Fund, L.P.                                              

Closing
Date
10/30/09

AllianceBernstein Legacy Securities Master Fund, L.P.

10/02/09

1,150

1,150

2,301

4,602

Blackrock PPIF, L.P.

10/02/09

695

695

1,390

2,780

Invesco Legacy Securities Master Fund, L.P.
Fund L P

09/30/09

856

856

1,712
1 712

3,424
3 424

Marathon Legacy Securities Public-Private Investment Partnership, L.P.

11/25/09

475

475

949

1,898

Oaktree PPIP Fund, L.P.

12/18/09

1,161

1,161

2,322

4,643

RLJ Western Asset Public/Private Master Fund, L.P.

11/05/09

621

621

1,241

2,482

Wellington Management Legacy Securities PPIF Master Fund, LP
Fund

10/01/09

1,149
1 149

1,149
1 149

2,299
2 299

4,598
4 598

7,350 $

7,350 $

Total Original Program Commitments
(1)

$

14,700 $

29,400

Excludes the effect of any repayments or reductions in the amount of outstanding obligations.

(2)

Excludes $4.1 billion in total purchasing power within UST/TCW Senior Mortgage Securities Fund, L.P., which was wound-up and liquidated during
1Q 2010. Treasury realized a profit of $20.1 million on its $156.3 million equity investment in UST/TCW Senior Mortgage Securities Fund, L.P., equal to
a 1.13x multiple of paid in capital on Treasury's equity.

3

CAPITAL ACTIVITY
Set forth below is a summary of equity and debt paid in capital(1) by PPIF. As of September 30, 2012, the PPIFs have
drawn-down approximately $24.4 billion of the total original capital committed (82.9% of total original purchasing
power), which has been invested in Eligible Assets and cash equivalents pending investment. Excluding PPIFs that
have completed their Investment Period, the PPIFs have drawn-down approximately $8.6 billion of the total capital
committed (74.6% of total purchasing power). In addition, Treasury has received approximately $4.1 billion in net
cumulative equity distributions, approximately $302 million in cumulative interest payments and approximately $6.5
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billion in cumulative debt principal payments from the PPIFs as of September 30, 2012.

Summary of Paid in Capital by PPIF ($ in Millions)
Fund

Original
Purchasing
Power

Gross Paid in Capital(1)
% Original
Purchasing
Private Treasury Treasury
Power
Equity Equity
Debt
q y
q y
Total

$

$ 1,117

Gross Distributions(2)
Private Treasury Treasury Treasury
Equity
Debt Warrant
Equity
q y
q y

Total

Investment Period Open
AG GECC PPIF Master Fund, L.P.

4,973

$1,117

$2,235 $ 4,470

89.9%

$

652 $

652 $

947 $

- $ 2,252

Marathon Legacy Securities Public-Private Investment Partnership,

1,898

475

475

949

1,898

100.0%

121

121

149

-

391

Oaktree PPIP Fund, L.P.

4,643

556

556

1,111

2,223

47.9%

131

131

202

-

465

$ 2,148 $ 2,148 $ 4,295 $ 8,591

74.6%

905 $

905 $

Investment Period Open - Total Paid in Capital (1)

$

11,514

$

1,298 $

- $ 3,108

Investment Period Closed
AllianceBernstein Legacy Securities Master Fund, L.P.

4,602

1,064

1,064

2,128

4,256

92.5%

1,518

1,518

2,128

-

5,164

Blackrock PPIF, L.P.

2,780

528

528

1,053

2,109

75.9%

137

137

233

-

507

Invesco Legacy Securities Master Fund, L.P.

3,424

581

581

1,162

2,324

67.9%

717

720

1,162

3

2,602

RLJ Western Asset Public/Private Master Fund, L.P.

2,482

621

621

1,241

2,482

100.0%

487

487

1,241

-

2,215

1,149

1,149

2,299

4,598

100.0%

-

1,128

$ 6,091 $ 6,091 $ 12,178 $ 24,360

82.9%

Wellington Management Legacy Securities PPIF Master Fund, LP
Total PPIP - Total Paid in Capital (1)

4,598
$

29,400

(1)

4,112 $

349
4,116 $

430
6,493 $

3 $ 14,724

Excludes the effect of any repayments or reductions in the amount of outstanding obligations.

(2)

349
$

Excludes the effects of management fees and expenses attributable to either Private Equity or Treasury Equity.

4

PORTFOLIO HOLDINGS – SUMMARY BY SECTOR
The total market value of Non-Agency RMBS and CMBS held by all PPIFs was approximately $14.0 billion as
of September 30, 2012. Approximately 74% of the portfolio holdings are Non-Agency RMBS and 26% are
CMBS. The charts below show composition of Eligible Assets by sector(1).
Non-Agency RMBS(2)– $10.3 Billion

CMBS – $3.7 Billion
$69
2%

$429
4%
$1,585
15%

$30
1%

$2,880
28%
$1,460
40%

$2,137
58%
$5,381
52%

Prime

Alt-A

Subprime

($ in Millions)

Option ARM

Super Senior

AM

AJ

Other CMBS

($ in Millions)

(1) Please see page 9 for a glossary of Non-agency RMBS and CMBS sector definitions.
(2) Non-agency RMBS chart excludes $69 million of Other RMBS.
Note: Graphs and figures exclude AllianceBernstein and Invesco, which completed the sale of their remaining holdings of Eligible Assets,
returning substantially all of their proceeds to Treasury and the private investors.

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PORTFOLIO HOLDINGS – NON-AGENCY RMBS
The charts below illustrate the range of market prices of Non-Agency RMBS held by all PPIFs as of
September 30 2012 Prices are expressed as a percent of par value.
30, 2012.
value
Prime
100.0%

Alt-A
100.0%

Median Price: 83.4

80.0%
80 0%

80.0%
80 0%
60.5%

60.0%
40.0%
20.0%

7.1%

60.0%

48.8%

40.0%

29.4%

16.8%

17.2%
17 2%

< 40

20.0%

40 - 60

17.2%
17 2%

2.9%
0.0%

0.0%
< 40

40 - 60

60 - 80

80 +

Subprime
p
100.0%

Median Price: 67.8

60 - 80

80 +

Option ARM
p
100.0%

Median Price: 50.0

80.0%

80.0%

60.0%

Median Price: 65.3

60.0%
40.4%

40.0%
20.0%

57.1%

23.7%

19.2%

40.0%
16.7%

0.0%
< 40

40 - 60

60 - 80

80 +

20.0%

16.3%

20.4%
6.1%

0.0%
< 40

40 - 60

60 - 80

Note: Pricing is based on UST valuation process on a consistent basis across all PPIFs. Excludes Other RMBS. Graphs and figures exclude
AllianceBernstein and Invesco, which completed the sale of their remaining holdings of Eligible Assets, returning substantially all of their
proceeds to Treasury and the private investors.

80 +

6

PORTFOLIO HOLDINGS – CMBS
The charts below illustrate the range of market prices of CMBS held by all PPIFs as of September 30, 2012.
Prices are expressed as a percent of par value
value.
Super Senior

AM

100.0%

100.0%

Median Price: 55.3

80.0%
80 0%

80.0%
80 0%

66.7%

60.0%

60.0%
33.3%

40.0%

40.0%
20.0%

20.0%
0.0%

95.9%

Median Price: 105.1

0.0%
< 40

0.0%
40 - 60

60 - 80

0.0%
80 +

1.4%

1.4%

1.4%

< 40

40 - 60

60 - 80

80 +

AJ
J
100.0%

Median Price: 87.2

80.0%

69.7%

60.0%
40.0%

28.8%

20.0%
0.0%

1.5%

< 40

0.0%

40 - 60

60 - 80

80 +

Note: Pricing is based on UST valuation process on a consistent basis across all PPIFs. Excludes Other CMBS. Graphs and figures exclude
AllianceBernstein and Invesco, which completed the sale of their remaining holdings of Eligible Assets, returning substantially all of their
proceeds to Treasury and the private investors.

7

PERFORMANCE
Set forth below is a summary of performance of Treasury’s equity since inception for the program and by fund
manager. Note performance will vary among PPIFs due to different risk/return objectives, leverage ratios, and
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sector allocations among other reasons. The influence of these factors as well as others on performance may
evolve over time based on market conditions. PPIFs have less than three months remaining on their three-year
investment periods. Performance to date may be disproportionately impacted by the pace of capital deployment
by each PPIF. Because of this, industry practice counsels that, at this stage, performance analysis done on funds
that have yet to complete their investment strategies would not generate meaningful results and it would be
premature to draw long-term conclusions about the performance of active individual PPIFs or PPIP in general
from the data reported to date. It should be noted that the current and past performance of a PPIF is not
indicative of its future performance.
Performance Since Inception as of September 30, 2012 ($ in Millions)
p
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(
)
Program - Cumulative Performance
Total - Treasury Equity

Original Capital
Commitment
$
7,350

Paid in
Capital
6,091

(1)

$

Net Cumulative
Distributions
$
4,084

(1)

(2)

Net Multiple of
Paid in Capital
1.48x

(2)(3)

Net of management fees and expenses attributable to Treasury's equity.

(3)

Net Ending
Capital
$
4,933

Excludes the effect of any repayments or reductions in the amount of outstanding obligations.

(2)

(2)

Calculated as the sum of Net Cumulative Distributions received and Ending Capital balance of Treasury's equity position as a multiple of Paid in Capital.

Fund
Investment Period Open
AG GECC PPIF Master Fund, L.P.
Marathon Legacy Securities Public-Private Investment Partnership,
Oaktree PPIP Fund, L.P.
Investment Period Closed
AllianceBernstein Legacy Securities Master Fund, L.P.
Blackrock PPIF, L.P.
Invesco Legacy Securities Master Fund, L.P.(6)
RLJ Western Asset Public/Private Master Fund, L.P.
Wellington Management Legacy Securities PPIF Master Fund, LP

Inception
Date

Investment
Period
End Date

11/12/09
12/15/09
02/19/10

10/30/12
11/25/12
12/18/12

105.7%
81.5%
61.3%

23.3%
22.4%
25.5%

1.57x
1.57x
1.28x

10/23/09
10/16/09
10/13/09

10/02/12
10/02/12
09/26/11

177.6%
89.3%
33.5%

18.7%
22.7%
18.2%

1.45x
1.70x
1.23x

11/23/09
10/19/09

07/15/12
10/01/12

92.2%
63.5%

23.9%
17.8%

1.67x
1.41x

(1)

Net Time Weighted
Cumulative Return
Since Inception

(1)

Time-weighted geometrically linked return calculated on a consistent basis across all PPIFs.

(4)

Dollar-weighted rate of return calculated on a consistent basis across all PPIFs.

(5)

Net Multiple of
Paid in Capital

Net of management fees and expenses attributable to Treasury's equity.

(3)

(2)(4)

Expires on or before the third anniversary of the PPIF's Initial Closing.

(2)

(2)(3)

Net Internal
Rate of Return
Since Inception

Calculated as the sum of Net Cumulative Distributions received and Ending Capital balance of Treasury's equity position as a multiple of Paid in Capital.

(6)

With respect to Invesco, returns were calculated through March 2012, as the PPIF completed the sale of its remaining holdings of Eligible Assets in March 2012, returning substantially all of its proceeds
to Treasury and the private investors.

8

(2)(5)

GLOSSARY OF TERMS
Non-Agency Residential Mortgage-Backed Securities (RMBS)

Non-Agency R id i l M
N A
Residential Mortgage B k d S
Backed Securities (RMBS) T
i i (RMBS): Type of mortgage-backed security
f
b k d
i
that is secured by loans on residential properties that are not issued or guaranteed by Fannie Mae, Freddie
Mac or Ginnie Mae, or any other United States federal government-sponsored enterprise (GSE) or a
United States federal government agency. Non-Agency RMBS are typically classified by underlying
collateral / type of mortgage (i.e. Prime, Alt-A, Subprime, Option ARM).
Prime: M
Pi
Mortgage l
loan made to a b
d
borrower with good credit that generally meets the l d ’ strictest
ih
d di h
ll
h lender’s i
underwriting criteria. Non-Agency Prime loans generally are loans that exceed the dollar amount eligible
for purchase by the GSEs (jumbo loans), but may include lower balance loans as well.
Alt-A: Mortgage loan made to a borrower with good credit but with limited documentation, or other
characteristics that do not meet the standards for Prime loans. An Alt-A loan may have a borrower with a
lower FICO score, a hi h r l
l
r
r
higher loan-to-value r ti or li it d or no d
t
l ratio, r limited r
documentation compared t a Prime loan.
t ti
p r d to Pri l
Subprime: Mortgage loan made to a borrower with poor credit, typically having a FICO score of 620 or
less.
Option ARM: Mortgage loan that gives the borrower a set of choices of how much interest and principal
to pay each month. This may result in negative amortization (i.e. an increasing loan principal balance over
time).
i )
Commercial Mortgage-Backed Securities (CMBS)

Commercial Mortgage Backed Securities (CMBS): Type of mortgage-backed security that is secured
by loans on commercial properties such as office buildings, retail buildings, apartment buildings, hotels,
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etc. CMBS are typically classified by position in the capital structure (i.e. Super Senior, AM, AJ).
Super Senior: Most senior originally rated AAA bonds in a CMBS securitization with the highest level of
credit enhancement. Credit enhancement refers to the percentage of the underlying mortgage pool by
balance that must be written down before the bond experiences any losses. Super Senior bonds often
comprised 70% of a securitization and therefore had 30% credit enhancement at issuance.
AM: Mezzanine-level originally rated AAA bond. AM bonds often comprised 10% of a CMBS
securitization and therefore had 20% credit enhancement at issuance, versus 30% for Super Senior bonds.
AJ: The most junior bond in a CMBS securitization that attained a AAA rating at issuance.
9