T reit liquidating trust
To be clear, this is a financing tool, not a sales tool.Depending, of course, on the depths of ugliness in the pool, this is 35-55% leverage with a sponsor holding the risk piece.Seriously better pricing could be obtained if the debt could be both credit- and time-tranched like in most other structured finance products.Now there are ways around these problems, but none of these fixes work terribly well.That transaction architecture is being revived, and it’s about time.
Securitization of less than ideal conduit product has been with us since the birth of securitization, but reached its apogee in the RTC series, for non-performing loans, in the early to mid 1990s.
It’s going to be used, and it’s going to be used extensively in 2012.
It is a way to move assets that one party does not want, or cannot hold, into the hands of those who want the exposure.
The Code doesn’t pick on other asset classes in the same way. When mortgage loans are pooled, the so-called taxable mortgage pool rules (TMP) apply and these rules make it nigh unto impossible, in many cases, to issue more than one time-tranched class of debt.
Therefore, these vehicles tend to be somewhat inefficient with only one class of equity and one class of debt.