NEW YORK (Reuters) - Money manager Invesco Ltd (IVZ.N) and billionaire investor Wilbur Ross are leading a group committing $1 billion to buy toxic bank loans and securities through the U.S. government’s Public-Private Investment Program.
PPIP is a key part of the Obama administration’s efforts to shore up the banking industry by helping lenders sell troubled, illiquid assets that have clogged up balance sheets and plunged in value during the past two years.
The program is also a unique opportunity, Ross and Invesco Chief Executive Martin Flanagan said in an interview on Monday.
“At this stage, you don’t know where the most attractive opportunities will be. We just know they’re going to be big,” Ross told Reuters.
WL Ross, an investment fund run by Ross, who made his fortune investing in distressed companies and assets, is leading the charge by committing $1 billion from an existing investment fund raised in 2007.
Ross said he applied to the government on Friday to participate in the program. Firms chosen will be identified around May 15 and assets will be purchased starting in June.
Under the terms of the PPIP, the Ross team’s $1 billion would be matched by the U.S. Treasury. The group then could borrow as much as six times that amount through a program backed by the U.S. Federal Deposit Insurance Corp, which means the group would have $14 billion in purchasing power.
“The Public-Private Investment Program will help stimulate the mortgage market and provide individual and institutional investors globally with compelling investment opportunities,” Invesco
Key partners include Invesco, a fund manager with $159 billion in fixed-income assets, and the LeFrak Organization, a top real estate developer. WL Ross is a private equity unit of Invesco.
Also participating are bond insurer Assured Guaranty Ltd (AGO.N), which will lend risk management expertise, and American Home Mortgage Servicing Inc, one of the largest servicers of subprime mortgage loans. Both of these companies are controlled by Ross.
Rounding out the group are Muriel Siebert & Co, a pioneering woman-owned brokerage, and two minority-owned investment banks, New York-based Williams Capital Group and Jackson Securities in Atlanta.
Some critics have questioned whether PPIP will simply enrich big investors. A number of fund managers have backed away from the program, saying any benefits are outweighed by uncertainty over how profits will be treated.
Ross played down fears that big investment gains could be clawed back later by the U.S. Congress for political reasons.
“If that’s the case, I’ll be the victim and not our investors. It’s a risk we’ve decided to take. We’re relying on the good faith of the Treasury,” he said.
He also noted that the PPIP application says there are no executive compensation restrictions like those seen under the Troubled Asset Relief Program.
Down the road, Flanagan said, PPIP will provide opportunities for retail investors. Invesco, which sells mutual funds under the Invesco and AIM brands, said it could eventually create investment vehicles for small investors.
Reporting by Joseph A. Giannone; editing by John Wallace