U.S. Central and WesCorp Shed Assets to Repay Treasury
NCUA's sale of $800 million worth of U.S. Central FCU and Western Corporate FCU securities announced yesterday wasn't part of the regulator's legacy assets plan.
Rather, the transaction was one many already-completed sales of performing commercial real estate backed securities owned by the two seized corporates. NCUA has been applying sale proceeds toward a $10 billion loan from the U.S. Treasury to the seized corporates, and will apply future proceeds from additional sales until the borrowing is paid in full.
Deputy Executive Director Larry Fazio told Credit Union Times that there was no point in holding the investments to maturity and paying for outstanding borrowings. Not only would the two corporates be paying unnecessary interest charges, but the well-performing investments are trading so close to par they would incur miniscule, if any, losses upon sale related to so-called "unrealized losses."
NCUA has also been "unwinding" derivative positions on other U.S. Central and WesCorp investments in preparation for the securitization of legacy assets.Proceeds from those transactions are also providing positive cash flow for the two corporates.