A group including such major investors as Blackstone, Carlyle, Centerbridge and WLRoss won an auction for BankUnited on Thursday after the Florida lender – worth nearly $13bn by assets – was closed by federal regulators in the biggest US bank failure of 2009.
The auction, conducted by the Federal Deposit Insurance Corporation, was the second of a troubled US bank during the credit crisis. Earlier, a group including JC Flowers, hedge fund manager John Paulson and Dune Capital won the bidding for IndyMac’s assets.
The BankUnited deal includes a loss-sharing agreement on $10.7bn of the bank’s $12.8bn in assets. The government will take 80 per cent of the first $4bn in losses and 95 per cent of any remaining losses, people familiar with the transaction said. In return, the federal government will receive warrants giving it a share of any future upside. The new investors, meanwhile, will put $900m of equity into the bank, bringing its tangible common equity up to 8 per cent of assets, and giving it the ability to make acquisitions.
BankUnited, the largest independent bank in Florida, was dragged down by its large portfolio of adjustable-rate mortgages. It will be run by John Kanas, former chief executive of North Fork, a New York bank known for its aggressive deal-making, which was acquired by Capital One for $14.6bn in 2006.
The winning group had been in talks with regulators for almost four months.
When the talks were initiated, markets were at a low ebb, leading regulators to move slowly in the hope that sentiment would improve and more bids would be made.
Toronto Dominion Bank and Goldman Sachs submitted a bid with a complicated structure that would have seen the Canadian bank taking over BankUnited’s branches and Goldman acquiring some assets. A spokesman for that group declined to comment.
The transaction revealed on Thursday “is projected to maximize returns on covered assets by keeping them in the private sector”, the FDIC said.
Regulators have worried that sales of troubled banks to private capital should not look overly generous. Those fear were fed when Chris Flowers, founder of private equity firm JC Flowers, said the investor group that bought IndyMac’s assets had all the upside for the failed California bank, while the government had all the downside. Calls to Mr Flowers were not returned.
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