Prohibited Transaction Exemption for Nonmarketable Obligations Issued by Employer Affiliate?

[ERISAatty]

I'm working on an issue that's somewhat similar and any insights/thoughts are welcome. I'm trying to determine if there is a prohibited transaction applicable exemption to an unusual situation I've been presented with. Here are the facts, starting with why I believe it's prohibited absent an exemption:

-Bank-employer sponsors a 401(k) plan.

-Plan trustee is disinterested third party.

-100% of Bank's stock is owned by a Holding Company (which is not an S Corporation - so there's no potential 'second class of stock concern, just fyi).

-Holding Corporation has an amount of debt that needs to be paid off in order to grant the Bank more lenience by federal banking regulators so that Bank can again begin issuing dividends.

- (The same regulator prohibits the Bank from outright transfering extra cash to the Holding Company to pay the debt, on the theory that such transfer would constitute a 'dividend,' and that Bank is not allowed to issue dividends until it eliminates this debt.)

-Holding company, itself, has no income with which to pay the debt (it just holds the bank's stock).

-Since Holding Company owns 100% of Bank shares, this exceeds the 50% amount in the defintions of 'interested party' and 'disqualified person,' I am assuming that Holding Company is an interested party/disqualified person with respect to Bank's Plan.

-Bank-employer proposes the following:

-Have the Holding Company issue a "debt instrument," a.k.a. "Note" with a 2-3 year maturity that would pay 7% interest. I beleive this would be a *non*-marketable obligation under the ERISA 408 definition of 'qualifying employer securities.' It therefore does NOT qualify as a "marketable obligation" and therefore can't be a qualifying employer security for purposes of qualifying for that statutory PTE.

- Add a brokerage account to the plan.

- Allow those participants who wish to do so to invest in the Note as an investment under the 401(k) Plan.

I understand that the Bank-employer can't be fully protected from potential claims of fiduciary breach/imprudence for offering this investment in the event that the promised return fails to materialize. But I believe it could be a permissible brokerage window investment IF I can find a PTE. (And there are other issues, such as possibly doing a valuation, getting approval of an independent fiduciary, and finding a broker/TPA willing to manage the nonmarketable Note investment).

So far, I'm stumped in coming up with a class or individual PTE that is similar.

So I am thinking that I'll have to recommend to Bank that they apply for their own individual exemption.

Does anyone out there know of any existing PTE that might apply to this situation?

Thank you!!