Tuesday, June 16, 2009

The Fed Holds Nearly One Billion Dollars Of Extended Stay's Recently Bankrupt Credit

This was first reported a few weeks ago, but since Extended Stay has now officially filed, we thought it was important to review the fact that the Fed, through its Maiden Lane I (Bear Stearns) portfolio, holds nearly one billion dollars (face) of Extended Stay credit. Given the Fed has been holding that aggregate Maiden Lane I portfolio at only a modest discount to par, we suspect they have not yet revalued this POS.

The WSJ article linked above states:
Creditors who are not so lucky include some of the country's biggest banks and possibly U.S. taxpayers since one of the lenders was Bear Stearns, whose stake was assumed by the Federal Reserve after Bear collapsed in March 2008. As a result, the Fed had $744 million in face value of various junior classes of the debt on Extended Stay; it also held $153 million in the senior debt that was packaged and sold as bonds. A New York Fed spokeswoman declined to comment.
While the senior debt may have a decent recovery, depending on how it was structured, the bulk of the Fed's holding are in junior classes which are massively at risk.

Now that We The People are one of the major pre-petition creditors in a sizeable bankruptcy (with CRE implications, no less), it will be interesting to see how We behave.

Our long held conviction here at TILB has been that the next sector to be attacked under our Grand Unified Conspiracy Theory framework would be healthcare. However, perhaps we will backdoor our way in to the CRE or hotel and leisure industries first.

We already run the Lincoln Bedroom seven star resort, why not pick-up 680 properties around the country as well?

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