Tuesday, March 3, 2009

The TALF terms

The much heralded TALF starts on March 25. This will allow hedge funds to borrow from the Fed at the following rates to purchase the following assets, in a leveraged, non-recourse, non margin call investment for the next three years.

Nice terms, to buy these assets.

  • Auto, credit cards and private student loans--LIBOR +100bps
  • SBA loans--Fed funds +75bps
  • 504 SBA loans --three year LIBOR +50bps
  • Govt. guaranteed student loans--LIBOR+50bps

The "leverage" will depend on the haircut.

The bottom line is that 20%+ annual returns will be "earned" by participants in the TALF.

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