New York Fed to Consider Limiting TALF Loans Secured by CMBS

August 20, 2009

Reading Time : 2 min

On August 18, 2009, the Federal Reserve Bank of New York (New York Fed) announced that it may limit the volume of Term Asset-Backed Securities Loan Facility (TALF) loans secured by legacy commercial mortgage-backed securities (CMBS), and that it is considering whether to allocate such volume via an auction or another procedure.

In addition, the New York Fed indicated that certain eligibility and leverage restrictions will apply to TALF financing of legacy CMBS.  For example, not all Public-Private Investment Funds (PPIFs) will be eligible to borrow from the TALF in order to finance purchases of legacy CMBS.  According to the New York Fed, PPIFs that have received Treasury debt financing equal to or less than 50 percent of the PPIF’s total equity (including private and Treasury-supplied equity) may borrow from the TALF to finance purchases of eligible legacy CMBS.  By implication, PPIFs that have received Treasury debt financing in excess of 50 percent of the PPIF’s total equity may be barred from borrowing from the TALF to finance purchases of eligible legacy CMBS.

Furthermore, the New York Fed indicated that haircuts applicable to TALF-supplied debt issued to PPIFs to finance purchases of legacy CMBS will be adjusted upward, such that the combination of Treasury- and TALF-supplied debt will not exceed the total amount of debt that would be available leveraging the PPIF equity alone.  

Specifically, the New York Fed has stated that TALF haircuts for PPIFs purchasing legacy CMBS will be 50 percent higher than for other non-PPIF borrowers.  For example, if the TALF haircut applied to a specific pledge of legacy CMBS is 20 percent for other borrowers, it would be 30 percent for a PPIF.

These announcements, once in effect, will reduce the total amount of leverage available to PPIFs purchasing legacy CMBS.

CONTACT INFORMATION

 

We also invite you to visit the firm’s Economic Recovery Resource Center for news and analysis concerning the government’s economic recovery programs and their impact on business and the law.

 

If you have any questions concerning this alert, please contact—

 

Corporate      
C.N. Franklin Reddick III freddick@akingump.com 310.728.3204 Los Angeles
William D. Morris wmorris@akingump.com 713.220.5804 Houston
       
Investment Funds      
Burke A. McDavid bmcdavid@akingump.com 212.872.1083 New York
Stephen M. Vine svine@akingump.com 212.872.1030 New York
       
Government Contracts      
Scott M. Heimberg sheimberg@akingump.com 202.887.4085 Washington, D.C.
Robert K. Huffman rhuffman@akingump.com 202.887.4530 Washington, D.C.
       
Public Law and Policy      
J. David Carlin dcarlin@akingump.com 202.887.4133 Washington, D.C.
Robert J. Leonard rleonard@akingump.com 202.887.4040 Washington, D.C.
       
Real Estate and Finance      
Gregory S. Grigorian ggrigorian@akingump.com 202.887.4106 Washington, D.C.

Michael S. Mandel

mmandel@akingump.com 202.887.4196 Washington, D.C.
       
Tax      
Patrick B. Fenn pfenn@akingump.com 212.872.1040 New York
Stuart E. Leblang sleblang@akingump.com 212.872.1017 New York

Share This Insight

© 2024 Akin Gump Strauss Hauer & Feld LLP. All rights reserved. Attorney advertising. This document is distributed for informational use only; it does not constitute legal advice and should not be used as such. Prior results do not guarantee a similar outcome. Akin is the practicing name of Akin Gump LLP, a New York limited liability partnership authorized and regulated by the Solicitors Regulation Authority under number 267321. A list of the partners is available for inspection at Eighth Floor, Ten Bishops Square, London E1 6EG. For more information about Akin Gump LLP, Akin Gump Strauss Hauer & Feld LLP and other associated entities under which the Akin Gump network operates worldwide, please see our Legal Notices page.