SunTrust 2014 Annual Report Download - page 134

Notes to Consolidated Financial Statements, continued
111
receipt of benefits would generally manifest itself through the
retention of senior or subordinated interests in the securitization.
Total assets at December 31, 2014 and 2013, of the
unconsolidated trusts in which the Company has a VI were $288
million and $350 million, respectively.
The Company’s maximum exposure to loss related to the
unconsolidated VIEs in which it holds a VI is comprised of the
loss of value of any interests it retains, which are immaterial, and
any repurchase obligations it incurs as a result of a breach of
representations and warranties, discussed further in Note 16,
“Guarantees.”
Commercial and Corporate Loans
The Company has involvement with CLO entities that own
commercial leveraged loans and bonds, certain of which were
transferred by the Company to the entities. The Company
currently holds certain securities issued by these entities and
previously acted as collateral manager for the CLOs; however,
upon the sale of RidgeWorth in May 2014, the Company is no
longer the collateral manager. The Company previously
determined that it was the primary beneficiary of, and thus, had
consolidated one of these CLOs as it had both the power to direct
the activities that most significantly impacted the entity’s
economic performance and the obligation to absorb losses and
the right to receive benefits from the entity that could potentially
be significant to the CLO. The Company's involvement with this
CLO includes ownership in one of the senior interests in the CLO
and certain preference shares. Since the Company is no longer
the collateral manager for the CLO, the Company no longer
possesses the power to direct the activities that most significantly
impact the economic performance of the VIE; therefore, the
Company is no longer the primary beneficiary of this CLO and
in connection with the sale of RidgeWorth, the CLO was
deconsolidated. At December 31, 2013, the Company’s
Consolidated Balance Sheets reflected $261 million of loans held
by the CLO and $256 million of debt issued by the CLO.
At December 31, 2014, all CLOs that the Company has
involvement with are considered to be VIEs and are
unconsolidated. The Company has determined that it is not the
primary beneficiary of these entities as it does not possess the
power to direct the activities that most significantly impact the
economic performance of the VIEs. The Company's preference
share exposure was valued at $3 million at both December 31,
2014 and 2013. The Company's senior interest exposure was
valued at $18 million and $26 million at December 31, 2014 and
2013, respectively. At December 31, 2014 and 2013,
unconsolidated VIEs that the Company had involvement with
had $704 million and $1.6 billion of estimated assets,
respectively, and $654 million and $1.6 billion of estimated
liabilities, respectively.
Student Loans
During 2006, the Company completed a securitization of
government-guaranteed student loans through a transfer of loans
to a SPE, which previously qualified as a QSPE, and retained
the related residual interest in the SPE. The Company concluded
that this securitization of government-guaranteed student loans
should be consolidated. At December 31, 2014 and 2013, the
Company’s Consolidated Balance Sheets reflected $306 million
and $344 million, respectively, of assets held by the Student Loan
entity and $302 million and $341 million, respectively, of debt
issued by the Student Loan entity.
Payments from the assets in the SPE must first be used to
settle the obligations of the SPE, with any remaining payments
remitted to the Company as the owner of the residual interest.
To the extent that losses are incurred on the SPE’s assets, the SPE
has recourse to the federal government as the guarantor, up to a
maximum guarantee of 97%. Losses in excess of the government
guarantee reduce the amount of available cash payable to the
Company as the owner of the residual interest. To the extent that
losses result from a breach of the master servicer’s servicing
responsibilities, the SPE has recourse to the Company; the
Company may be required to repurchase the defaulting loan(s)
from the SPE at par value. If the breach was caused by the
subservicer, the Company has recourse to seek reimbursement
from the subservicer up to the guaranteed amount. The
Company’s maximum exposure to loss related to the SPE is
represented by the potential losses resulting from a breach of
servicing responsibilities. To date, all loss claims filed with the
guarantor that have been denied due to servicing errors have
either been or are in the process of being cured or reimbursement
has been provided to the Company by the subservicer.
CDO Securities
The Company has transferred bank trust preferred securities to
securitization entities, which have been determined to be VIEs.
The Company concluded that it was not the primary beneficiary
of any of these VIEs as the Company lacked the power to direct
the significant activities of the entities. During the first quarter
of 2014, the Company sold all of its remaining exposures to these
VIEs.