Gpe Talf Am Services 03 09 V1.4

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Gpe Talf Am Services 03 09 V1.4

  1. 1. ABS Asset Evaluation & Purchases in TALF Forming A TALF Fund Advised by GPE March 20, 2009 Globalprivatequity.com, Inc. www.gpe-inc.com
  2. 2. GPE: This Is Who We Are <ul><li>‘ GPE’ (Globalprivatequity.com, Inc. ) is a financial data services and technology company offering on demand fair value pricing and data solutions for structured and illiquid fixed income assets to high quality concerned, select professional Level 2 data users. </li></ul><ul><li>GPE offers asset selection and advisory services for TALF asset purchases for asset management programs using our i FVS ® proprietary models & algorithms </li></ul><ul><li>Our Independent Fair Value Services ( i FVS ® ) offers solutions for asset price valuation support for asset-backed securities (ABS), mortgage-backed securities (MBS), loans, corporate debt, distressed debt, and all structured credit products. </li></ul><ul><li>GPE emphasizes modeling techniques and unique algorithms running through our core proprietary technology Financial Business Intelligent System ( FBIS™ ) server network. </li></ul>
  3. 3. Management Bios <ul><li>Douglas Miles, Founder, Chairman & CEO: Over 20-year Wall Street investment banking career, Mr. Miles has held senior positions at Merrill Lynch Capital Markets, Deutsche Morgan Grenfell, and Kleinwort Benson </li></ul><ul><li>William Santangelo: Asset Financing Director & Federal Reserve Bank Liaison: Mr. Santangelo leverages over 40 years of practical experience in fixed income trade financing, administration and operations management to assist clients in managing capital and resources. He recently concluded a two year term on the US Treasury Market Practices Group. </li></ul><ul><li>William Kister, Operations Director: Mr. Kister possesses a 25 year plus Wall St. operations career specializing in fixed income derivative and structured financial products operations and client support at Citigroup, JPMorgan Chase, and Merrill Lynch Capital Services. </li></ul>
  4. 4. Management Bios(2) <ul><li>Gary Mitchell, Senior ABS Valuation Analyst: Mr. Mitchell is a 10 year veteran analytics professional and price modeling engineer specializing in all segments and aspects of ABS and MBS products. Bank One and Cambridge Partners are among his prior employers. He has modeled pricing of hundreds of complex fixed income and ABS products. </li></ul><ul><li>Jake Ginder, Chief Data Officer: Mr. Ginder is an experienced entrepreneur with strong business development and operations management skills in technology, healthcare, and logistics </li></ul><ul><li>Stephen L'Heureux, ABS & Structured Finance Solutions Manager: Mr. L’Heureux is co-founder of Chatham Analytics and Chatham Research and Proprietor of Zealand Mortgage Technologies. He possesses over 16 years or both trading and valuation modeling in the entire ABS & MBS sector. </li></ul>
  5. 5. TALF Primer & Essentials <ul><li>TALF is intended to assist credit markets in accommodating credit needs of consumers and small businesses by facilitating issuance of asset-backed securities (ABS) and improving market conditions for ABS products </li></ul><ul><li>Under TALF the Federal Reserve Bank of New York (“FRBNY”) may lend up to $1 trillion & will provide 3-year non-recourse/non-MTM loans to eligible buyers of AAA-rated ABS backed by newly originated consumer and small business loans </li></ul><ul><li>The FRBNY has announced that it plans to expand TALF to include additional asset classes. Previous programs aimed at providing relief to financial institutions -- this facility is targeted at providing credit to investors </li></ul>
  6. 6. TALF Primer & Essentials (2) <ul><li>TALF presents a significant investment opportunity for many investor types The FRBNY released the program terms including haircuts and funding costs on February 6, 2009 and launched TALF on March 3, 2009 </li></ul><ul><li>Haircuts range from 5% - 16% based on the asset type and the average-life of the ABS Funding costs will initially be 1MLIBOR + 50-100 bps for floating rate loans and 3Y Swaps + 50-100 bps for fixed rate loans </li></ul><ul><li>Subscription for the first TALF loan was completed on March 19, 2009 and it will fund on March 25, 2009 </li></ul>
  7. 7. Consumer Finance – Dearth of $ <ul><li>US markets are operating at a fraction of the credit available over the last decade for major to purchases like autos, college tuition, & credit card purchases. </li></ul>
  8. 8. Understanding the Need for Asset Selection & Fair Value Analysis Guidance in new issue TALF purchases … <ul><li>Fair valuation due diligence under the new TALF program is not merely a post trade phenomenon, it becomes an essential pre-trade or pre-purchase discipline in this complex asset class: </li></ul><ul><ul><li>Clients desiring manager guidance & advice have approached GPE seeking ASSET SELECTION advisory agreements. </li></ul></ul>
  9. 9. Investment Steps – Auto Loans <ul><li>The auto sector offers one of the preferred sectors with the added defense of AAA tranche ratings with FICO scores of 680 or higher and 30 day + delinquency is historically 1.5 to 2.2%. </li></ul><ul><li>Here are the six steps involved in the purchase decision for a TALF eligible security of pooled auto finance loans. </li></ul>
  10. 10. Key Business Process STEPS in Creating a TALF Fund 1. Form Investment Mgt. & Valuation Policy TALF Target Asset Groups or Asset Allocation for Three Year or More Term 2. GPE Review Process iFVS® Team for ABS Product Evaluation of All Target Investments 3. GPE On-Going Monitoring of Risk & Performance in Asset Portfolio & Identification of Direct Asset Acquisition Paths
  11. 11. Investment Step 1a. – Auto Loan (example) <ul><li>GPE & AM review eligible Auto Credit Issuer loan collateral on offer: </li></ul><ul><ul><li>EXAMPLE : FORD O 2008-A A3A maturity of 15-Oct-2011 fixed rate deal at a price of 97.00 yielding 6.30% </li></ul></ul><ul><ul><li>Funding cost is 3.06% with haircut of 7% offering levered return of 49.35% over WAL of 1.39 yrs. </li></ul></ul><ul><ul><li>Loan amount begins at $453,184,000 – controlled with $31,722,880 investment yielding a net positive C/F of $33,519,920 including received at maturity of $8,287,973.99 </li></ul></ul><ul><ul><li>See Stress Test Scenarios – Appendix 1. </li></ul></ul>
  12. 12. Investment Step 1b. – Auto Loan (example) <ul><li>GPE & AM review eligible Auto Credit Issuer loan collateral on offer: </li></ul><ul><ul><li>EXAMPLE : CARAT 2008-2 A2B maturity of 15-May-2010 floating rate deal at a price of 98.50 yielding 4.30% </li></ul></ul><ul><ul><li>Funding cost is 1.60% (Li +105) with haircut of 6% offering levered return of 46.60% over WAL of 0.55 yrs. </li></ul></ul><ul><ul><li>Loan amount begins at $335,151,083 – controlled with $19,907,429 investment yielding a net positive C/F of $5,099,008.00 including int. received of $71,742.22 </li></ul></ul>
  13. 13. Investment Step 2. – Auto Loan (example) <ul><li>GPE runs Intex analysis on current assumptions and create fair value for target CUSIP </li></ul><ul><ul><li>Compare to current relevant & comparable secondary market prices of like assets or like sectors </li></ul></ul><ul><ul><li>Confirm & normalize data & fair value results on all assets reviewed </li></ul></ul>
  14. 14. Investment Step 3. – Auto Loan (example) <ul><li>GPE Asset Selection Committee reviews results and recommends purchase of target CUSIP </li></ul><ul><ul><li>Returns report to analyst/strategist and AM for review </li></ul></ul><ul><ul><li>Denotes whether asset is of future interest at different price and/or reason for rejection of asset proposed </li></ul></ul>
  15. 15. Investment Step 4. – Auto Loan (example) <ul><li>Transaction Management will review all documentation to insure compliance with all TALF requirements . </li></ul>
  16. 16. Investment Step 5. – Auto Loan (example) <ul><li>Once approved by GPE Selection Committee, AM executes purchase order at Primary Broker/Dealer account </li></ul><ul><li>AM receives purchase confirm with financing details from Primary Broker/Dealer at designated order execution price and position is entered into record of FRBNY at their custodian or financial agent. </li></ul>
  17. 17. Investment Step 6. – Auto Loan (example) <ul><li>At AM level, perform on-going independent operations and financial oversight of Prime Broker’s administration of TALF asset & financing positions. Ensure effective controls are in place. </li></ul><ul><li>On date of settlement, confirm recording of TALF transaction & agree to final order execution & settlement reflected in FRBNY’s custodian reports </li></ul><ul><li>Reconcile all AM general ledger accounts and financial statements to Prime Broker subsidiary records, bank accounts, and custodial statements. </li></ul>
  18. 18. The Fair Value Process
  19. 19. Plan Steps for a TALF Fund <ul><li>Review & execute GPE advisory engagement agreement </li></ul><ul><li>Create SPV Investment Co. (optional) </li></ul><ul><li>Create Year One operating budget (optional) </li></ul><ul><li>Create appropriate legal structure and staff (optional) </li></ul><ul><li>Open necessary banking, custody, and prime brokerage accts. </li></ul><ul><li>Review & execute all necessary TALF documentation and agreements </li></ul>
  20. 20. Appendix 1.– Stress Test
  21. 21. Independent Fair Value & Asset Selection Services

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