In June, 2010, Turning Point Asset Management closed on a purchase of 50 percent equity interest in a limited liability company (LLC) created to hold approximately $313 million of primarily non-performing residential real estate loans out of 17 failed banking institutions with the FDIC as receiver.
As an equity participant, the FDIC, as Receiver for the 17 failed banking institutions, will retain a 50 percent stake in the LLC and share in the returns on the assets. The FDIC offered 1:1 leverage financing, inclusive of a financing facility resulting in the creation of $56.1 million of original principal amount of Purchase Money Notes issued by the LLC. The note will be guaranteed by the FDIC in its corporate capacity, it is unlikely that a call will ever be necessary on this guarantee. This is primarily due to restrictions in the priority of payments limiting distributions to the equity partners until the purchase money notes are paid in full as well as the relatively high level of over collateralization of the notes.
Additionally, Turning Point Asset Management has funded several liquidity accounts that will supplement contributions by TPAM to finance certain permitted development and disposition activities related to the assets. The sale was conducted on a competitive basis on either a 50 percent leveraged ownership interest or a 20 percent unleveraged ownership interest in the newly-formed LLC.
The FDIC, as Receiver for the failed banks, will convey to the LLC a portfolio of approximately $313 million residential loans and owned real estate, of which about 78 percent are ADC loans with the remainder being owned real estate.
As the LLC's managing equity owner, Turning Point Asset Management will provide for the management, servicing, and ultimate disposition of the LLC's assets.