WALLINGFORD, Conn. – NCUA plans to liquidate Constitution Corporate FCU, the fifth corporate failure, as part of its legacy assets program.
Under the program, NCUA is using the cash flows from toxic assets of the five corporates–U.S. Central FCU, WesCorp FCU, Members United Corporate FCU and Southwest Corporate FCU, as well–to create its own bonds–a process known as resecuritization. Under the process, NCUA stripped the five corporate failures of their assets and used them to create trusts which will hold the bonds and pay off the new bonds, known as NCUA Guaranteed Notes. The new bonds are created from the interest and principal payments of the toxic bonds.
NCUA, which has sold some $12 billion worth of the notes so far, plans its next offering after Thanksgiving.
While the other four corporates will live on as so-called Bridge Corporates and continue providing certain services, like settlements, Constitution will not become a Bridge Corporate.
The five corporate failures are projected to cost NCUA and credit unions about $16 billion to resolve.
