Since 1977, we have been experts in providing financing solutions in the form of Real Estate Trust Preferred Securities (TRuPS)
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REAL ESTATE TRUST
PREFERRED SECURITIES
(TRuPS)

 

Ocean Pacific Capital has been providing the best Commercial Real Estate financing for clients since 1977. We have extensive experience in providing financing solutions in the form of Real Estate Trust Preferred Securities (TRuPS). Real Estate Trust Preferred Securities or TRuPS for short are similar to debentures and preferreds that is generally longer term, has early redemption features, makes quarterly fixed interest payments, and matures at face value.

Trust preferreds have been created by companies for their favorable accounting treatments and flexibility. Specifically, these securities are taxed like debt obligations by the IRS, while having many characteristics of equities. They are recorded as debt in a company's accounting statements as according to GAAP procedures, but may be treated as capital for regulatory purposes.Because the interest paid to the trust is tax deductible, the company may enjoy a significantly lower cost of funding.

They offer many advantages over other funding choices including equity or secured/unsecured debt. They are cost effective and typically will improve ROE if used as a substitue for equity. Also the issuer can pick from a variety of pricing alternatives and have efficient execution time, with no marketing or SEC registration requirements.

Trust preferred securities (TRuPS) are cumulative preferred stock issued by bank holding companies through a special purpose vehicle. For the issuing bank holding company, TruPS combine benefits of both debt and equity.

The special purpose vehicle is wholly owned by the bank holding company and is usually a trust. It sells the TruPS to investors and uses the proceeds to purchase a subordinated note from the bank holding company. This becomes its sole asset, and cash flows from the note largely mirror the dividends payable on the TRuPS. The note has an initial maturity of at least 30 years. Dividends are paid quarterly or semi-annually. Dividends may be deferred for at least five years without creating an event of default or acceleration.

From a tax standpoint, TRuPS have a significant advantage over the direct issuance of preferred shares. This is because dividends on preferred shares are not deductible as a business expense, but interest on a subordinated note is. In this regard, the TRuPS behaves like debt. In another regard, it behaves like equity. In 1996, the Federal Reserve ruled that up to 25% of a bank holding companies tier 1 capital may comprise TRuPS or directly-issued preferred stock. In 2005, the Fed reaffirmed this treatment of TRuPS after FASB modified the accounting treatment of TRuPS under GAAP.

Initially, TRuPS were only issued by larger bank holding companies. This changed in 2000, when several institutions issued TRuPS, which were pooled in a CDO. Since then, the TRuPS CDO market has grown dramatically and has become a significant source of capital for small and medium sized bank holding companies. Contact one of our best TRuPS specialists today for a free consultation at 1-800-595-1474 or fill out a simple information request form.

 


Whatever your financing needs,
we will tailor a loan that's right for you.

 
 
 

Wall Street Journal
Commercial News

11/24/20

WSJ.com: US Business

AstraZeneca-Oxford Vaccine Up to 90% Effective in Trials
The success of the vaccine being developed by the University of Oxford and AstraZeneca bodes well for the near-term availability of a third treatment for Covid-19, joining those from Moderna as well as Pfizer and BioNTech.

Merck to Buy OncoImmune for $425 Million Amid Race for Covid-19 Treatments
The drugmaker is buying biopharmaceutical company OncoImmune, which has reported positive results from a late-stage study of a coronavirus therapeutic candidate, for $425 million in cash.

GM Stops Backing Trump Administration in Emissions Fight With California
General Motors will no longer back the administration in its legal battle to strip California?s authority to set its own fuel-efficiency regulations, saying GM?s goals for green cars are aligned with the state and the new Biden administration.

GM to Recall 5.9 Million Vehicles With Takata Air-Bag Inflaters
General Motors has agreed to replace potentially faulty Takata air-bag inflaters in millions of its pickups and SUVs, a fix ordered by federal safety regulators that could cost the auto maker more than $1 billion.

Amid Coronavirus Surge, Holiday Shoppers Flock to Malls
Americans visited malls over the weekend saying they wanted to do Christmas shopping before potential lockdown restrictions are implemented or to avoid Black Friday crowds, as the spreading coronavirus looms over the holiday season.

Biden Picks Janet Yellen for Treasury Secretary
President-elect Joe Biden plans to nominate former Federal Reserve Chairwoman Janet Yellen, an economist at the forefront of policy-making for three decades, to become the next Treasury secretary.

U.S. Economic Activity Picks Up on Postelection Lift, Vaccine Results
The U.S. economy continues to recover from the downturn caused by the pandemic, according to business surveys that show services and manufacturing activity growing, while surveys show the European economy is set for a fresh contraction in the final quarter of 2020.

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Charles Elfsten, President
Charles A. Elfsten
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