Private Equity News & Analysis

Five firms raise $3bn to buy toxic assets

Invesco, TCW and Blackrock are among the firms that have held initial closings on funds that will buy distressed assets from banks and help reinvigorate the US credit markets.

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Five firms have so far raised $3 billion for investments in “toxic” bank assets, ratcheting up the total purchasing power of the US government's Public-Private Investment Program to more than $12 billion.

The US Treasury said Monday that about $2 billion has been raised by AllianceBernstein, with its sub-advisors Greenfield Partners and Rialto Capital Management, as well as BlackRock and Wellington Management. Those firms join Invesco and the TCW Group, which together raised about $1.1 billion in September.

In total, the five firms have raised $3.07 billion, the government has providing matching equity of $3.07 billion and $6.13 billion in debt, bringing the total purchasing power of the programme to $12.27 billion.

Other qualified firms are expected to hold initial closes on their funds throughout October, the Treasury said in a statement. These firms include Oaktree Capital Management, Marathon Asset Management, RLJ Western Asset Management and a partnership between Angelo Gordon and GE Capital Real Estate.

PPIP is meant to take bad assets – most of which are mortgage-related – off of banks' balance sheets. The programme was originally envisioned to generate $1 trillion of purchasing power to re-invigorate the frozen credit markets, but the plan has been scaled back and now looks likely to generate around $40 billion.

As part of the programme, small, veteran, minority and women-owned firms were qualified to partner with the pre-selected fund managers. The firms partnering with the pre-qualified firms that have completed initial closings include Advent Capital Management, Altura Capital Group, Utendahl Capital Management Atlanta Life Financial Group through subsidiary Jackson Securities, Muriel Siebert & Co. and The Williams Capital Group.