Wednesday, January 02, 2008

TD Bank Can Bolster Its Money Market Fund, SEC Says

Bloomberg, Jesse Westbrook, 2 January 2008

A Toronto Dominion Bank unit, trying to prevent investor losses, received regulators' approval to buy $300 million in mortgage-linked securities out of one its money market funds.

The U.S. Securities and Exchange Commission won't object if Toronto Dominion's TD Asset Management USA Inc. purchases ``trust certificates'' held by the fund, the SEC said in a Dec. 21 letter released by the agency. The certificates, which may trigger losses if the underlying home loans default, account for about 1.6 percent of the fund's total assets.

Toronto Dominion, Canada's second-largest bank, joins Legg Mason Inc. and Bank of America Corp. in trying to bolster money- market funds whose holdings have plunged amid the worst U.S. housing slump in 17 years. The bailouts are aimed at keeping funds from falling below the $1-a-share threshold promised to investors. That can shake confidence and spur withdrawals.

``The Company's board of directors has authorized the proposed transaction as being in the best interest of the fund and its shareholders,'' TD Asset Management said in a Dec. 21 letter to the SEC.

The trust certificates, issued by Corsair Trust I-1020, are held by TD Asset Management's TDAM Money Market Portfolio. TD Asset Management sought permission to buy the certificates after determining ``the absence of liquidity in the market'' may have prompted losses.

Corsair is a limited-purpose finance company, similar to a structured investment vehicle, TD Asset Management spokeswoman Lisa Hodgins said. The trust certificates, which included a credit-default swap, were a ``non-material holding'' for the TDAM Money Market Portfolio, she said in an interview.

SEC spokesman John Nester declined to comment.

SIVs, popular investments for money funds looking to increase yields, sold commercial paper or medium-term debt backed by subprime mortgages. SunTrust Banks Inc. and Bank of America have propped up funds with SIV-issued debt in the past month.

Atlanta-based SunTrust received SEC approval in October to prop up two money-market funds if they suffered losses on $115 million in medium-term notes issued by an SIV. Last month, SunTrust injected $1.4 billion into the funds.