The US Government over the past several months has turned into a formidable distressed investing Private Equity shop. The General Partners (Uncle Sam and team) have said that the Limited Partners (taxpayers) will have limited exposure if any. Hmmm…not sure how the deals were structured but as a Limited Partner I’m hoping to get a peak at the term sheets. Anyways, let’s take a look at their recent deals:
Bear Sterns – This deal is very unique from a PE perspective, JPMorgan owns 100% of the company assets and Uncle Sam is potentially liable for 100% of the debt. I’m not sure what the exit is for Uncle Sam, it seems there is no upside and only downside.
Fannie/Freddie – Although they are separate entities I’ll treat them as one. Uncle Sam again owns nothing has the ability to own upto 79.9% in these entities and has already pulled rank and fired the CEO’s of both entities when the deal was announced. Uncle Sam is on the hook for USD 5 trillion in mortgages that Fannie/Freddie own. (I believe that is the first time I’ve used the word trillion on my blog). The “term sheet” (hat tip Todd).
AIG – Uncle Sam will own 79.9% equity right off the bat. AIG will have access to a loan facility of upto USD 85 billion at LIBOR + 850 basis points. I hope as a limited partner I can get some insurance discounts from AIG.
As with any PE shop I hope they are looking to diversify, the financials seem a bit risky. I suggest they look at the automotive sector, I hear Cerberus Capital is getting raked over the coals with Chrysler.