Ahh, the allure of toxic assets

CRAIN’S NEW YORK BUSINESS

by AARON ELSTEIN

– March 17, 2009 –

Stymied in his attempt to acquire Starrett City when the federally subsidized housing complex was taken off the market earlier this year, financier Donald Cogsville is trying something new: He wants to bid for distressed mortgages and other loans under the U.S. Treasury’s Public-Private Investment Program, which is expected to start auctioning off bank assets next month.

Mr. Cogsville, a Crain’s “40 Under 40” in 2005, says he’s lining up investors to acquire “north of $100 million” worth of distressed loans. The government is looking to unload as much as $1 trillion worth.

Like many investors, Mr. Cogsville is attracted by the generous terms the federal government is offering private players to take dud assets off banks’ books. Uncle Sam is advancing money managers large amounts of taxpayer funds, while promising to minimize their losses.

Bedazzled by the potential windfall, top-shelf investors such as BlackRock’s Larry Fink and “King of Bankruptcy” Wilbur Ross are trying to get in on the program, lovingly known as the PPIP. So are small minority-owned investment firms, including Mr. Cogsville’s Cogsville Group, and economic forecaster Maria Fiorini Ramirez’s firm, which last week teamed up with private equity investor Paramax Capital Partners.

Mr. Cogsville says he’s never invested in distressed properties, though he helped arrange such deals when he worked at Merrill Lynch and at law firm Skadden Arps. To help navigate the new terrain, he’s turning to advisers such as former Resolution Trust Corp. official Stanley Tate. The RTC helped the government dispose of billions of dollars in distressed properties after the savings and loan crises a generation ago.

While distressed debt may be new to Mr. Cogsville, dealing with the government isn’t. He grappled with numerous bureaucracies as he tried to buy Starrett City in Brooklyn, which could provide valuable insights as he works with the Treasury, the FDIC and other regulators overseeing the PPIP.

“This seems,” he says, “like a natural thing to do next.”

 

Posted in The Cogsville Group News