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 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 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

11/25/20

WSJ.com: US Business

GE Plans More Job Cuts in Aviation Division
General Electric warned employees that more job cuts are coming to the conglomerate?s jet-engine business because of the pandemic?s impact on commercial air travel even with the promise of a vaccine on the horizon.

AstraZeneca Gears Up to Vaccinate the World
Among the front-runners racing to deliver a Covid-19 shot, AstraZeneca has the least vaccine experience. But it has promised the world the most doses?more than three billion.

Penguin Random House Parent Near Deal to Buy Simon & Schuster From ViacomCBS
ViacomCBSInc. is close to a deal to sell book publisher Simon & Schuster to German media giant Bertelsmann SE for more than $2 billion, according to people familiar with the matter.

Dick's Sporting Goods CEO Ed Stack to Step Down
The retail executive built the company into a national chain during his decades at the helm and led it into a contentious national debate over gun violence. He will remain chairman and chief merchant.

Europe's Biggest Utility Company to Ramp Up Spending on Wind, Solar Power
Enel plans to spend around $83 billion expanding its presence in wind and solar power in the coming decade, seeking to cement its position as the world?s largest renewable energy producer outside China and capitalize on the shift to green energy.

Politics Isn't Janet Yellen's Forte, but It's What She's In for Now
Biden?s pick for Treasury secretary has done it all in economic policy, and if confirmed will face new tests on debt and spending in a deeply divided Washington.

Upbeat Investors Look Past Current Woes
U.S. economic growth is slowing and coronavirus cases are surging, but stocks climb ever higher as investors look ahead to when vaccines usher in better days.

BRE #:00619059
Charles Elfsten, President
Charles A. Elfsten
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