BlackRock, Inc. (NYSE:BLK) today announced that it has returned to investors substantially all of the proceeds, at a profit, from its BlackRock Public-Private Investment Fund (the “Fund”). These returns represent a net multiple of 1.74x on funded capital and an internal rate of return of 23.5% on Treasury’s equity investment since the Fund’s inception in October 2009 as part of the Legacy Securities Public-Private Investment Program (“PPIP”). The Fund, managed by BlackRock, was jointly owned by the U.S. Department of the Treasury (“Treasury”) and private investors. Treasury has received $917.1 million in net equity distributions (consisting of the return of Treasury’s $528.2 million investment in the Fund and approximately $388.9 million in profits).
Additionally, the Fund has accrued $9.7 million in warrant proceeds to be distributed to Treasury and has repaid approximately $1.09 billion of the drawn amounts under the Treasury funded credit facility plus interest.
“We are proud to have been selected as part of the PPIP and are extremely grateful for Treasury’s expressed confidence that we could deliver attractive returns, particularly during a time of such severe stress on the global financial system,” said Robert S. Kapito, President of BlackRock. “Our ability to aid in the stability of the mortgage-backed security market and deliver solid investment returns is evidence that a partnership between the public and private sectors can be truly rewarding and profitable.”
Mr. Kapito continued: “As with all of our investments, our primary goal is to maximize the return for all of our investors, including Treasury, through a carefully constructed risk framework. When considering and integrating the goals of the program with current conditions of the marketplace we believed optimization of the Fund’s investment objectives was achieved through timely liquidation.”
On March 23, 2009, Treasury announced the Legacy Securities Public-Private Investment Program as a key component of President Obama’s Financial Stability Plan, which outlined a broad framework to bring capital into the financial system and address the problem of legacy real estate assets. PPIP was designed to support market functioning and facilitate price discovery in the markets for legacy commercial mortgage-backed securities ("CMBS") and non-agency residential mortgage-backed securities ("RMBS"). Using capital allocated from the Troubled Asset Relief Program alongside capital from private investors, the PPIP was designed to generate a significant purchasing power to buy legacy assets from the market. The Fund was one of nine Public-Private Investment Partnerships in the program. Under the program, the Fund held its initial closing in October 2009 and ultimately deployed over 75% of the approximately $2.78 billion in available committed capital, including $695.0 million in equity capital commitments from Treasury, $695.0 million in capital commitments from private investors, and $1.39 billion of committed debt capital from Treasury.