Monday, November 2, 2009

PPIP - No Sellers?

US Banker magazine purports that PPIP won't work because their aren't any sellers...

Many observers say demand for the program has dropped off significantly, and will not rebound unless the Treasury can prove there are deals to be had. "I don't see any toxic assets selling yet," says Cornelius Hurley, a professor at the Graduate Program in Banking and Financial Law at Boston University School of Law. "Right now, it's just a bunch of announcements. There's a certain jawboning effect of this, and if Treasury keeps making these announcements, no one is going to believe them anymore, until we have actual deals."

Cornelius, the failure to "see any toxic assets selling yet" is likely a result of being cooped up in an office teaching rather than doing. No offense is intended.
The Treasury Department said in October that five investment funds have raised $1.94 billion in private capital to purchase toxic assets through its Public Private Investment Program.

At the end of the day, the PPIP funds are going to have to target Resi's in large part, and AJs within the CMBS stack. There ARE sellers - AIG is one, but just looking at TALFable CMBS bid lists activity from Barclays (below), you can see that there is plenty of activity - and this doesn't even include AJs!

However, you can also just look at overall bid activity within our little CMBS world, and we're seeing several hundred million per day, and a typical week is $2 - $5 billion in selling...


Anonymous said...

I believe the professor was referring to loan assets not selling vs. securities. Everyone knows securities are selling, just talk to a guy on a trading desk to get color.

The securities sell because they are marked at market levels--loans for the most part are not. PPIP, TALF, etc. won't change the situation because the sellers are on a 5-year pace towards meeting the market levels.

Dark Space said...

You'd hope everyone knows. He didn't specify loans or securities, he said "I don't see any toxic assets selling yet". The paragraph above the one quoted in the article references securities by themselves, and some of the ones below reference both loans and securities. Either way, "I don't see any toxic assets selling yet" is wrong.

Distressed loans may be hard to come by, but we're seeing them too. I've found most of the folks that are having a hard time "seeing" them today, aren't looking hard enough.