Mentor Capital has submitted its application to the US Department of the Treasury to become a public-private investment fund to buy legacy securities currently held by banks.
For approved applicants, the US Treasury has announced that for each $100 of private equity the Treasury will provide $100 in matching government equity plus $100 to $200 in additional loans. For the related legacy loan programme, the Treasury will also match private equity, and the government, through the Federal Deposit Insurance Corporation, would then consider larger, six-to-one, debt-to-equity ratios.
The application is submitted under the Treasury provision to encourage small business participation. Mentor Capital has started the first of four tranches that would raise $145m for the company. If approved by the Treasury as a public-private investment fund (PPIF), Mentor Capital will also seek to raise the $355m additional equity capital required to meet the minimum PPIF funding of $500m.
In applying for regulatory permission for the additional $355m raise, Mentor Capital will seek approval of public investment at an $8,000 minimum, unless a lower minimum is requested by the Treasury. The intent of the low minimum is to open up the co-investment with the Treasury to everyday Americans.
If the Mentor Capital application to be a PPIF is approved, the Treasury public-private investment programme will be providing alternatives to resolve 100% of financial system toxic assets.
