The first sign of light at the end of the tunnel of frozen redemptions appeared last night as Federated Investors and Putnam Investments announced that shareholders of the $12.3 billion Putnam Prime Money Market Fund Institutional will become clients of Federated Prime Obligations Fund in a "$1-per-share for $1-per-share" transaction. Putnam Institutional shareholders won't lose any money and should be able to access their cash today.
The press release states that after 5pm today, "The Putnam Prime Money Market Fund will invest its assets in the Federated Prime Obligations Fund in an in-kind purchase transaction. The action follows Putnam's Sept. 18, 2008 announcement ... to close the institutional Putnam Prime Money Market Fund ... on Sept. 17, 2008 and to liquidate the fund. Federated Prime Obligations Fund is an AAAm-rated fund with $22.1 billion in assets ... designed for use by fiduciaries and other institutional investors who have rigorous requirements for safety and daily liquidity at par."
"We believe this transaction with Federated is very beneficial to the shareholders of the Putnam Prime Money Market Fund," says Putnam President & CEO `Robert Reynolds. "First, we wanted to be fair and equitable to all shareholders, which is why we closed the fund. Second, in liquidation, we were looking for the best solution possible. The transaction with Federated accomplishes this objective," he says in a press release.
The release adds, "Federated's money market portfolio managers have thoroughly reviewed the securities in the $12.3 billion Putnam Prime Money Market Fund. Each security accepted in this in-kind transaction meets Federated's rigorous credit requirements. Federated, through its proprietary credit review process, examined each security in terms of capital structure, liquidity structure, management structure and other key factors before accepting these securities."
Deborah Cunningham, CIO of Federated's taxable money markets, says, "Federated welcomes this opportunity to provide the shareholders of the Putnam institutional money market fund with a high-quality option for their institutional cash needs. We believe that this transaction offers significant benefits for the shareholders of Federated Prime Obligations Fund.... Preserving capital, providing liquidity and competitive yields for clients has been a fundamental strength of our cash management business for more than 30 years. The transaction further reinforces our position as an industry leader."
"Putnam Prime Money Market Fund's liquidation plan will provide its shareholders with a like amount of Federated Prime Obligations Fund shares on a $1-per-share for $1-per-share basis. Shareholders of Putnam Prime Money Market Fund will be entitled to dividends through Sept. 24, 2008. The accumulated, but unpaid, dividends will be paid on Sept. 25, 2008 by Putnam. Such shareholders will be entitled to dividends from Federated Prime Obligations Fund beginning Sept. 25, 2008," says the release.
Finally, Federated adds, "With recent actions taken by the U.S. Treasury and the Federal Reserve Board designed to help stabilize the financial markets and promote liquidity, market conditions have improved for money market funds. Of note for shareholders of Federated Prime Obligations Fund on Sept. 19, 2008, the fund would expect to participate in the insurance program announced by the U.S. Treasury when it becomes available." Federated's total money market mutual fund assets as of Sept. 22 were approximately $248 billion, up from $242 billion on Sept. 15.
