BOSTON / NEW YORK – EJF Capital LLC, the multi-billion dollar credit-focused investment company, is asking its customers for a loan to avoid further losses in one of its private funds, according to a recent letter from the company consulted by Reuters.
Sent to investors in the $ 206 million favorite EJF Trust Preferred Fund, the letter says that recent turmoil in the short-term finance markets has made coronaviruses difficult to use such debt, which could risk greater loss of funds if positions were to be liquidated to repay it. .
The EJF has said it wants to reduce risk by reducing or eliminating the use of short-term “repo” funding, which the US Federal Reserve has supported in recent weeks. Repurchase agreements are quick repayment loans, often overnight and generally used by banks and financial companies to provide adequate capital in their books https://www.reuters.com/article/usa-fed- repo-tools / explainer-the-fed -a-un-repo-problem-whats-that-idUSL2N2681IF.
“The increased margins and capital requirements associated with these borrowings can force the sale of assets at uneconomic prices in times of market disruption similar to the one we face today,” the letter said.
The fix, said the EJF, is a loan. Investors in the fund would be paid 16% between 12 and 24 months from the term of the debt. The EJF hopes to raise between 25 and 58 million dollars.
“We offer an attractive risk-adjusted return to investors who participate in the mezzanine loan while eliminating the Fund’s exposure to short-term leverage and protecting the value of existing capital,” the letter said.
An EJF spokesperson declined to comment. Arlington, Virginia-based firm Emanuel “Manny” Friedman and Neal Wilson, managed $ 13.5 billion, leveraged, at the end of 2019, according to a recent Securities and Exchange Commission report the United States. Assets are closer to $ 7 billion without leverage.
The loan request comes after the EJF said on March 27 that it is blocking withdrawals from its $ 2.5 billion debt opportunity fund after requests to buy back about 6% of its assets, according to a letter sent to customers and reviewed by Reuters.
The move was aimed at “protecting all of the Fund’s investors by not selling assets in a market that is not working,” the letter said, noting that it has already dropped 15% for the month ending March 27. .
This news had already been reported by the Wall Street Journal. (Reporting by Lawrence Delevingne in Boston and Anna Irrera in New York; Editing by Tom Brown)