Rasameel Structured Finance Proposes $150 Billion Private Investment Plan for Auto Industry

WASHINGTON--Statement from Arthur Pacheco, North American representative for Rasameel Structured Financing, a Kuwait based investment firm. Rasameel is offering an alternative approach to restructuring the American automobile industry, bringing $150 billion in private investment and a ten year plan to recast the industry as a financially sound, leading international competitor. Mr. Pacheco is an equities veteran of more than 40 years, and is chairman of the National Organization of Investment Professionals, and a past chairman of both the Security Traders Association and its New York affiliate, STANY.

“The GM and Chrysler plans submitted today as part of the auto manufacturers’ requirement to demonstrate long term viability, appear to leave many details and concessions yet to be worked out with unions and bondholders. What is missing in the plans that have been submitted may say more to us than the information the plans contain. It is clear that neither the UAW nor creditors are optimistic about how they will fare under any restructuring proposal. Exchanging existing positions for stock whose value is low and dropping is decidedly unattractive. The possibility that bankruptcy looms for automakers, while offering a potentially workable alternative, further complicates the way that all parties to the restructuring are evaluating their options.

The frantic and fragmented negotiations of the last several weeks have yielded plans that lead only to more negotiations. This reality, along with the fact that the Administration is just now – understandably so – putting together its team to oversee automobile manufacturer restructuring, presents an opportunity and provides a rationale for looking at fresh solutions for the U.S. auto industry.

Administration and Congressional leaders have attempted to include policies to incent the private sector to participate with the government in the financial rescue efforts. In his January 12, 2009, letter to Congressional leadership, Larry Summers, the Director of the President’s National Economic Council, indicated the importance of “Maximiz[ing] the Role of Private Capital and Plan[ning] for Exit of Government Intervention”. Treasury Secretary Tim Geithner, when announcing the Administration’s Financial Stability Plan last week also stated, “We believe our policies must be designed to mobilize and leverage private capital, not to supplant or discourage private capital.” In addition, the Emergency Economic Stabilization Act of 2008, which authorized the Troubled Assets Relief Program (TARP), includes requirements that the Treasury Secretary take actions to minimize long-term costs and maximize benefits for taxpayers, including encouraging “the private sector to participate in purchases of troubled assets, and to invest in financial institutions”.

Rasameel Structured Finance, an investment company specializing in conservative, asset backed financing, has developed a unique financing instrument for distressed industries that would include private sector participation and limit U.S. government involvement and financial commitment. Applied to the automobile industry, it provides just the sort of thinking that President Obama is inviting in saying “if you’ve got a good idea we want to hear it.”

Through North American and global partners, Rasameel is prepared to raise $150 billion over 10 years to revitalize the U.S. auto industry, recasting it as a formidable best-in class international competitor. Key features of the Rasameel proposal:

Creation of a joint venture involving U.S. auto makers, investors, suppliers, dealers, and the federal government. The initial capitalization would be $100 billion in cash and assets to create a new, transformative automobile company
The joint venture would purchase assets from each of the major US automobile companies. In return, each company would receive both short-term financing as well as a stake in the joint venture.
Rasameel would issue asset backed Rasameel Certificates in the amount of $50 billion with three year terms. This would be done in a series of three consecutive tranches.
The U.S. government would invest $25 billion for an ownership position, provide a 10 year tax moratorium for the new entity, and guarantee the principal, secured by assets. The revenues generated by the joint venture, and the increasing value of the federal government’s ownership stake would greatly offset the tax loss.
Financing would be made available to the United Auto Workers to help auto workers through the existing turmoil in the industry and a substantial pool of money would be allocated for R&D.
A funding pool would be made available for bridge loans to selected dealers to offer much needed direct financing for consumers.
At the conclusion of 10 years, the investors will redeem their investment via a liquidity event, with the U.S. Government in the preferred position.

This framework not only would limit investment of taxpayer dollars, but it would offer the government an opportunity to participate in the upside potential, meaning taxpayers might actually realize a significant return on their investment. It would inject much needed liquidity into the marketplace, boost the economy by restoring investor confidence, preserve and create American jobs and create consumer confidence in the American automobile industry. In short, it’s a “good idea”.”