FDIC has pre-empted the traditional Bank Failure Friday with the announcement that BankUnited had become the largest US bank failure this year.
From the press release:
BankUnited, a newly chartered federal savings bank, acquired the banking operations, including all of the nonbrokered deposits, of BankUnited, FSB, Coral Gables, Florida, in a transaction facilitated by the Federal Deposit Insurance Corporation (FDIC). As a result of this transaction, BankUnited, FSB, offices and branches will be operated as BankUnited offices and branches.
BankUnited’s 86 offices will be open tomorrow during normal business hours. BankUnited, the successor institution, will be the largest independent bank in Florida, as was its predecessor (BankUnited, FSB). The management team is headed by John Kanas, a veteran of the banking industry and former head of North Fork Bank.
Got that? BankUnited (2.0) replaces BankUnited, FSB (defunct), with the former being owned primarily by a consortium of private equity groups:
In addition to the management team led by John Kanas, ownership includes WL Ross & Co. LLC; Carlyle Investment Management L.L.C.; Blackstone Capital Partners V L.P.; Centerbridge Capital Partners, L.P. LeFrak Organization, Inc; The Wellcome Trust; Greenaap Investments Ltd.; and East Rock Endowment Fund.
The consortium, which is led by Wilbur Ross, will inject $900m of fresh capital into the bank.
But while the FDIC might be saving on logos and branding, this was not a cost-free transaction (emphasis ours):
Bank United, FSB had assets of $12.80 billion and deposits of $8.6 billion as of May 2, 2009. The new BankUnited will assume $12.7 billion in assets and $8.3 billion in nonbrokered deposits. The FDIC and BankUnited entered into a loss-share transaction and will share in the losses on approximately $10.7 billion in assets covered under the agreement. The loss-sharing arrangement is projected to maximize returns on the covered assets by keeping them in the private sector. The agreement also is expected to minimize disruptions for loan customers as they will maintain a banking relationship. BankUnited will recapitalize the institution with $900 million in new capital.
The FDIC estimates that the cost to its Deposit Insurance Fund will be $4.9 billion. BankUnited’s acquisition of all the deposits and assets of BankUnited, FSB was the “least costly” resolution for the DIF compared to alternatives.
This is the 34th failure of an FDIC-insured institution this year, and the third in Florida, the regulator said.
There’s also some interesting language in the press release related to private equity investors who might be looking to invest in failed FDIC-insured institutions:
Due to the interest of private equity firms in the purchase of depository institutions in receivership, the FDIC has been evaluating the appropriate terms for such investments. In the near future, the FDIC will provide generally applicable policy guidance on eligibility and other terms and conditions for such investments to guide potential investors.
Wait and see.
Related links:
A spot of bother at BankUnited – FT Alphaville
Ross and Carlyle eye rescue bid for BankUnited – FT (February 2009)
Trio set to bid for troubled US bank – FT