The Federal Deposit Insurance Corporation (FDIC) on March 26 announced the opening of the public comment period for the Legacy Loans Program (LLP). The FDIC and the Department of the Treasury recently announced the LLP, which will remove troubled loans and other assets from FDIC-insured institutions and attract private capital to purchase the loans. (For more information, please see Katten's Client Advisory published March 26). The FDIC is seeking public comment from interested parties on the critical aspects of the LLP. Comments are requested no later than April 10.
The program is intended to boost private demand for distressed assets that acurrently held by banks and facilitate market-priced sales of troubled assets. The LLP will combine an FDIC guarantee of debt financing with equity capfrom the private sector and the Treasury. The partnerships will purchase assets from banks and place them into what will be known as Public-Private Investment Funds (PPIF).
The FDIC has stated that institutions of all sizes will be eligible to participate in the LLP to sell assets, and that the program will particularly encourage the participation of individuals, mutual funds, pension plans, insurance companieand other long-term investors. Investors will be pre-qualified by the FDIC to participate in auctions. For providing a guarantee, the FDIC will be paid a fee,a portion of which will be allocated to the Deposit Insurance Fund. The FDIC stated it will be protected against losses by the equity in the pool, the newly established value of the pool's assets and the fees collected.