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Since 1996, the National Credit Union Administration (NCUA) has authorized Low-Income Credits Unions (LICUs) to raise uninsured secondary capital, from institutional investors, in the form of subordinated debt. 

For a LICU, the capital counts directly towards the PCA Net Worth Ratio, a powerful tool to (1) strengthen a credit union in the face of adverse economic conditions and (2) offer additional capacity to invest in improvements to the member experience.

With the adoption of a new Subordinated Debt Rule in 2022, the universe of credit unions permitted to raise subordinated debt has grown dramatically. No longer limited to LICUs, now Complex Credit Unions and New Credit Unions are permitted to raise subordinated debt following the approval of an application to the NCUA.  

For a Complex Credit Unions, the subordinated debt counts towards its numerator in the calculation of the Risk Based Capital Ratio. For a LICU, it counts towards both the PCA Net Worth and the Risk Based Net Worth calculation.

Since January 2019, our firm has assisted more than 50 clients in gaining approval for subordinated debt applications worth well over $1 billion. We are proud that our subordinated debt transactions with credit union issuers include some of the largest, most complex and most creative structures in the market to date. Olden Lane’s team of experts is uniquely suited to advise on all aspects of the subordinated debt process.