I hope I am misunderstanding this from the Treasury term sheet on the Legacy Securities investment program:
Since you ask, the "Treasury Capital Term" is the wrap-up date of the fund, not to exceed ten years.
And my fright? I don't want interest to accrue - I want it to be paid! Annually, quarterly, monthly, whatever but unless investors are not allowed to dividend out any cash at all it is absurd that cash interest payments are not required.
My guess is that I am just overthinking this. Presumably, they mean that the loan principal is payable at the termination of the fund and interest would be paid annually, as is normal practice. Still, these are not normal times...
Me thinks you have it backwards, this refers to loans TO the funds from Treasury, in which case it's good for the funds that interest wouldn't be due until the wrap up date... not so good for the taxpayer.
Posted by: steve sturm | March 23, 2009 at 05:31 PM
I'm not clear what the term "fund" means. Does it mean the structured entity, or the equity investor in the structured entity?
Posted by: Fresh Air | March 23, 2009 at 05:59 PM
You know how it is when you have to rush to get something like this out.
Posted by: Charlie (Colorado) | March 23, 2009 at 06:05 PM
The term sheet says "Fund Managers must agree to waste, fraud and abuse protections for the Fund to be defined by Treasury in order to protect taxpayers."
Imagine the liablity risks for the five Fund Managers who will manage the shared equity investments of 3rd party investors and the US Treasury. I'd want some pretty strong disclaimers if I were on the side of the Fund Managers.
Posted by: Tom | March 23, 2009 at 07:06 PM
Its a PIK BOND! Another one of wall street innovations! Now the government is in the structured finance
ponzi schemebusiness!!Posted by: Gmax | March 23, 2009 at 08:23 PM