Fed Releases Details of JP Morgan Credit Facility

Steve Liesman's brief conversation with Jamie Dimon after the close today revealed that Dimon did not feel anyone twisted his arm on the price for Bear Stearns, and he is getting pretty sweet terms to boot.

Repayment of the loans will begin on the second anniversary of the loan, unless the Reserve Bank determines to begin payments earlier. Payments from the liquidation of the assets in the LLC will be made in the following order (each category must be fully paid before proceeding to the next lower category):

* to pay the necessary operating expenses of the LLC incurred in managing and liquidating the assets as of the repayment date;
* to repay the entire $29 billion principal due to the FRBNY;
* to pay all interest due to the FRBNY on its loan;
* to repay the entire $1 billion subordinated note due to JPMC;
* to pay all interest due to JPMC on its subordinated note;
* to pay any other non-operating expenses of the LLC, if any.

Any remaining funds resulting from the liquidation of the assets will be paid to the FRBNY. NY Fed

The whining from the Bear camp certainly paid off, in the form of a sweetened bid. Bear's shareholders played the only hand they had, although the biggest deal of Alan Schwartz's career won't likely result in an opulent closing dinner. The falafel cart on the corner of 47th and Park might have to suffice.

Backlash from Bear Stearns shareholders threatened to derail the deal, even as J.P. Morgan officials grew concerned about details in an agreement rushed out over a single weekend.

The New York Fed told J.P. Morgan officials that if the firm were to change its original deal with Bear Stearns, then the Fed would also have to reopen the economics of its agreement, according to people familiar with the conversations. Real Time Economics

The discussions with the Fed continued into this past weekend, with the broad outlines of the agreement determined on Sunday. The New York Fed’s lawyers and financial advisers worked throughout the night, until 4:30 a.m. Monday, to put the details in place. James Dimon, J.P. Morgan’s chairman and chief executive officer, and New York Fed President Timothy Geithner talked at 7 a.m. Around 9 a.m., the firm and the Fed finalized their end of the agreement.

New York Fed officials see the new terms as lowering the chance that the deal would unravel in a way that threatens market stability. The revised agreement also raises the the odds that the central bank will come out of the deal without losses. The Fed is taking on some of Bear Stearns’ riskier assets, but the new agreement requires J.P. Morgan to take a loss first and also provides financing over a longer time horizon. The New York Fed plans to provide additional details about the deal’s terms later Monday.

Strange days on Wall Street. This deal was shadier than the typical PIPE transaction. And although we continue to be amazed by Dick Bove efforts to market himself 24x7, we shared his sentiments over Dimon’s comments to take care of Bear’s managing directors, calling it a “bribe”.

At least Dimon paid the stockholders what the building was worth, and he gets the furniture for free.

Summary of Terms and Conditions Regarding the JPMorgan Chase Facility
New York Fed

New York Fed Decided to Renegotiate Role in Bear Deal
Real Time Economics

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