Bloomberg News

Credit Suisse Paid $6.8 Billion for AIG’s Home-Loan Bonds

April 16, 2012

The entrance to Credit Suisse Group AG's headquarters in Zurich. Photographer: Gianluca Colla/Bloomberg

The entrance to Credit Suisse Group AG's headquarters in Zurich. Photographer: Gianluca Colla/Bloomberg

Credit Suisse Group AG (CS:US) paid $6.8 billion to the Federal Reserve Bank of New York for $13 billion of home-loan bonds that had been assumed in the U.S. rescue of American International Group Inc. (AIG:US)

Goldman Sachs Group Inc. (GS:US) paid $3.5 billion for $6.2 billion of the securities in the New York Fed’s Maiden Lane II vehicle while winning one of the three auctions conducted in January and February, according to data posted today on the central bank’s website. Credit Suisse won the other two.

The amount sold and buyers were previously disclosed. The New York Fed had said the prices were sufficient to conclude repayment of its $19.5 billion loan to the vehicle and earn taxpayers a $2.8 billion profit. Andrea Priest, a New York Fed spokeswoman, and Michael DuVally, a spokesman for Goldman Sachs, declined to comment, as did Credit Suisse’s Jack Grone.

The central bank had halted a series of regular and more public auctions of mortgage securities held by Maiden Lane II last year after traders blamed sales of about $10 billion for damaging credit markets. It finished selling the rest this year after opting to conduct auctions through a more limited number of dealers in response to unsolicited bids.

The New York Fed said this month it’s also considering selling assets from its separate Maiden Lane III portfolio, helping to roil the market for commercial-mortgage debt.

Maiden Lane Bids

The central bank this week is also probably accepting bids on a pool of $672 million of home-loan bonds being held by its first Maiden Lane vehicle, according to Empirasign Strategies LLC. The New York-based provider of data on securitized-debt trading based the assessment on a list of securities being auctioned and Fed disclosures on the vehicle’s holdings. Priest of the New York Fed declined to comment.

The initial Maiden Lane was created to house assets from Bear Stearns Cos., enabling the emergency sale of the investment bank to JPMorgan Chase & Co. in 2008. It holds a broader range of assets including government-backed and other securitized debt as well as real-estate loans and hedges.

The Fed has been slowly reducing that vehicle’s holdings through sales that it doesn’t announce publicly. The central bank got $744 million in proceeds last quarter from investment banks led by RBS Securities Inc., a unit of Edinburgh-based Royal Bank of Scotland Group Plc, which paid $186 million for Maiden Lane assets, according to data on its website. Proceeds fell from $3.8 billion in the previous quarter.

‘Improving Market Conditions’

The district bank is owed $2.9 billion on its Maiden Lane loan, with the vehicle’s holdings valued at about $5.5 billion, based on Dec. 31 prices, according to its website.

With Maiden Lane III, the New York Fed has decided “to explore possible sales of some of the assets in the portfolio in light of improving market conditions and the success of the Maiden Lane II sales,” Jack Gutt, a spokesman, said in an e- mailed statement on April 4.

Those holdings were also taken over in the bailout of AIG and include two collateralized debt obligations, or CDOs, with a face amount of $7.49 billion that are tied to commercial- property debt. The central bank is owed almost $9 billion on its loan to Maiden Lane III with the holdings, mainly CDOs tied to residential debt, valued at about $17.6 billion.

To contact the reporter on this story: Jody Shenn in New York at jshenn@bloomberg.net

To contact the editor responsible for this story: Alan Goldstein at agoldstein5@bloomberg.net


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Companies Mentioned

  • CS
    (Credit Suisse Group AG)
    • $26.39 USD
    • 0.21
    • 0.8%
  • AIG
    (American International Group Inc)
    • $54.59 USD
    • 0.14
    • 0.26%
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