As the markets anxiously await further details of the FDIC’s new Public-Private Partnership Investment Program (PPIP), a few institutional players have tentatively indicated their willingness to participate. Many other potential participants are uncertain whether they can or should participate due to the absence of details as to how the program will work. Further, many potential buyers remain wary of co-investing with the federal government on a 50-50 basis, despite promises of government-guaranteed loans offering up to 6:1 leverage, citing concerns such as potential regulatory scrutiny over asset management practices.

Our recent experience representing buyers and sellers of portfolios of distressed debt suggests that potential participants would be wise to watch how the FDIC addresses several key issues, because these issues will have a direct and substantial impact on the risks potential bidders will be asked to assume and thus the way potential bidders will price the assets. These issues include...

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