WEST PALM BEACH, Fla.-Based on one securities firm's close analysis of the "legacy assets" of the five failed corporates, assessments for the Corporate CU Stabilization Fund should be ending soon.
Amid the debate within the CU community over whether the legacy assets will ultimately ever recover sufficient value and require additional assessments, or whether those assets will perform better than expected and NCUA should consider a rebate (Credit Union Journal, May 20), the Journal recently asked one securities firm for its analysis of the investments behind those assets.
Credit Union Journal provided the firm, which asked for anonymity, CUSIP-level details on the legacy assets, including the purchase price, original face and par values ending in the first quarter of this year. (CU Journal obtained the information from NCUA via a Freedom of Information Act request.)
After combing through all of the 2,500 securities to gauge their market value, the firm said the value NCUA has set on the assets is slightly below the securities' actual value at the end the first quarter.
"We had the estimated market value of the legacy assets at $21.6 billion as of March 30, 2013," noted a representative from the investment firm. "NCUA had the market value at $19.1 billion as of Dec. 31, 2102. The trust that holds all of the assets also has $1 billion in cash. The outstanding balance of the [NCUA guaranteed notes] at year-end was $21.16 billion. Therefore, NCUA is saying they are under-collateralized by $1 billion and we indicate they are over-collateralized by $1 billion. It seems to me that future assessments are not warranted."
NCUA Director of Examination and Insurance Larry Fazio has told Credit Union Journal that it is "impossible to predict" when the corporate assessments will end. "There are a lot of variables," said Fazio. "One is ongoing performance of the underlying legacy assets and how that relates to the obligations we owe the NGN investors.
"There are some other residual assets in the Asset Management Estates we are still in the process of monetizing. However, most of that is done. The other variable is the pace at which the NCUA board makes assessments. But one thing I will say with certainty is that [the stabilization fund] will be done by 2021."