Thursday, October 1, 2009

Two Treasury partners raise $500 million each for toxic assets effort

TCW Group Inc. of Los Angeles and Invesco Ltd. have completed their initial fundraising as part of the Public-Private Investment Program. Seven other fund managers are expected to follow suit

By Jim Puzzanghera, Los Angeles Times

October 1, 2009

Reporting from Washington

The Treasury Department's long-awaited attempt to deal with toxic mortgage securities cleared another hurdle as two of the nine fund managers selected to lead public-private partnerships to purchase the assets raised at least $500 million each.

Invesco Ltd. and Los Angeles-based TCW Group Inc. have completed their initial fundraising from private investors, bringing in a total of $1.13 billion in capital commitments as part of the Public-Private Investment Program, the Treasury said Wednesday. The money has been matched by the Treasury, which also will provide debt financing, giving the two funds a combined purchasing power of $4.52 billion.

Those funds now have 10 days to call in some of the capital and then can start purchasing assets.

"This program allows Treasury to partner with leading investment management firms to increase the flow of private capital into the market for legacy securities and give taxpayers a chance to share in the profits," said Treasury Secretary Timothy F. Geithner.

Securities backed by soured mortgages and other bad investments were at the heart of the financial crisis, and Congress created the $700-billion Toxic Asset Relief Program last fall to buy them from financial institutions.

But the Bush administration decided to use some of the money to purchase equity stakes in banks and concluded the original plan to purchase the assets was too complicated to be successful.

The Obama administration has tried to launch a scaled-back program, designed to use the remaining TARP money to lure private investors into buying the assets in partnership with the government. In July, the Treasury Department announced a significantly downsized program, with the goal of getting private fund managers to raise as much as $10 billion, which would be combined with as much as $30 billion in government money to buy the assets.

The Treasury Department named nine fund managers in July, which then began raising money from private investors. The department said it expected the seven other fund managers, including BlackRock Inc. and Wellington Management Co., to each raise the minimum $500 million by the end of the month. Once they reach that threshold, the fund managers have six months to raise additional money, up to $1.1 billion each.

jim.puzzanghera@

latimes.com