Making a rare foray into the commercial mortgage-backed securitization market, the Federal Deposit Insurance Corp. has packaged and sold off a pool of securities backed by nearly $400 million in loans from failed banks.
The deal, which the agency called a "pilot" securitization, was its first in the CMBS market since the start of the recent crisis, though it did complete a similar sale of residential mortgage-backed securities in July of last year. Securitizations involving failed-bank assets were more common during the savings and loan crisis of 1980s and 1990s.
In the deal announced Tuesday, the FDIC constructed the securities from about $394 million in performing commercial and multi-family loans from 13 failed banks. The agency projected that the sale would net $353 million in revenue for the Deposit Insurance Fund.
Investors could bid on three different classes of securities. The highest-quality, or senior, securities included 80% of the assets, and were sold to various organizations, including banks, at a fixed rate of 1.84%. Securities in the "mezzanine" and "subordinate" classes, which both sold at a fixed rate of 5%, were bought by an affiliate of LNR Partners LLC of Miami Beach.
