Davis Polk & Wardwell Newsflash

FDIC to Discuss Guaranteeing Mandatory Convertible Debt Under the Temporary Liquidity Guarantee Program

February 24, 2009

In an open Board meeting on Friday, February 27, 2009, the Federal Deposit Insurance Corporation (the “FDIC”) is expected to discuss a modification to the Temporary Liquidity Guarantee Program (the “TLGP”) to guarantee mandatory convertible debt.  The Final Rule for the TLGP currently excludes from the definition of senior unsecured debt, among other instruments, any debt instruments that are paired or bundled with other securities, convertible debt, and securities containing embedded options, forwards, swaps, or other derivatives.

No details regarding the possible expansion to cover mandatory convertible debt have been made available yet.

Other amendments to the Final Rule are expected as well, although the FDIC Board’s agenda does not indicate whether they will be discussed on February 27, 2009: in a joint statement dated February 10, 2009 by the Treasury, the Federal Reserve, the FDIC, the Office of the Comptroller of the Currency and the Office of Thrift Supervision, the FDIC announced the extension, “for an additional premium,” of “the TLGP program through October 2009.”  The latter is presumably shorthand for the expansion of the debt issuance window under the TLGP from June 30, 2009 to, and including, October 31, 2009.  No further details have been announced yet.

See Notice of FDIC Board Meeting released February 23, 2009.

See Joint Statement dated February 10, 2009.

For additional information regarding the Temporary Liquidity Guarantee Program, please refer to the following Davis Polk memorandum: Temporary Liquidity Guarantee Program: FDIC Final Rule.

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If you have any questions about the matters covered in this newsflash, please contact any of the lawyers listed below or your regular Davis Polk contact:

John M. Brandow, Partner
212-450-4296 | john.brandow@dpw.com

Luigi L. De Ghenghi, Partner
212-450-4296 | luigi.deghenghi@dpw.com

Randall D. Guynn, Partner
212-450-4239 | randall.guynn@dpw.com

Michael Kaplan, Partner 
212-450-4111 | michael.kaplan@dpw.com

Arthur S. Long, Partner
212-450-4742 | arthur.long@dpw.com

Warren Motley, Partner 
212-450-4032 | warren.motley@dpw.com

Annette Nazareth, Partner*
212-450-4804 | annette.nazareth@dpw.com

Margaret E. Tahyar, Partner 
011-33-1-56-59-36-70 | margaret.tahyar@dpw.com

Christopher S. Schell, Counsel
212-450-4011 | christopher.schell@dpw.com

Joerg Riegel, Associate
212-450-4253 | joerg.riegel@dpw.com


Davis Polk & Wardwell

*Admission pending in DC; practicing in DC under the supervision of partners of the firm.