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To: RealMuLan who wrote (70668)	10/29/2007 10:41:33 PM
From: RealMuLan	Read Replies (1) \| Respond to of 116555

M-LEC banks stand to make billions Renée Schultes 29 Oct 2007 financialnews-us.com The banks participating in the Master Liquidity Enhancement Conduit, the super-fund planned by four US banks to ease liquidity concerns in the market, could make more than $1.3bn (€900m) in management fees and even more in other charges, according to people who have seen an early prospectus. Bank of America, Citigroup, JP Morgan and Wachovia are backing M-LEC, which is expected to raise assets of $75bn to $100bn and which is supported by the US Treasury. Three people who have seen a prospectus dated October 8 – a week before the fund became public – said the banks will earn 1% on structured investment vehicles of less than $5bn, and 1.5% for SIVs over $15bn. The banks will also earn fees for the provision of backstop liquidity facilities. Structured investment vehicles are off-balance sheet funds that seek to profit from the difference in the cost of short-term borrowings and higher returns on structured credit. Christian Stracke, an analyst at CreditSights, said: “Even at 1% it’s still very high. These are vehicles that have little wriggle room in what they can afford to give up, especially SIVs that have taken a beating in their asset values.” The prospectus also details what SIVs will receive for selling their assets to M-LEC. Qualifying SIV holders will be eligible for up to 94% of the value of the assets they sell in cash, or 89% cash and 5% in senior capital notes, in the form of medium- term notes, that will participate in part of the upside when the assets mature. SIVs can also buy junior capital notes based on a formula set by M-LEC, where SIVs would get 3% plus half the discount at which they sell their assets. For example, if the SIV sells its assets at 98, which is a discount of 2%, it could take 94% of that in cash and 4% in junior capital notes. The banks, which met again last Friday evening, may have refined the initial terms in the past three weeks. The banks declined to comment.