FDIC super sale

5 January 2009 By Lauren Silva

The private equity firms buying the US bank will get $23bn in loans and securities, mortgage businesses and other assets for an outlay of just $1.6bn in cash. Governmentrun FDIC also handed them several other benefits. The agency should drive a harder bargain next time.

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The Federal Deposit Insurance Corporation signed a letter of intent to sell the banking operations of IndyMac Federal Bank to a thrift holding company which includes Steven Mnuchin of IMB Management, J.C. Flowers, Paulson & Co., MSD Capital, Stone Point Capital, SSP Offshore (a fund managed by George Soros), and Silar Advisors.

The new IndyMac consists of 33 branches with $6.5bn in deposits, a $16bn loan portfolio, a $6.9bn securities portfolio, and two mortgage platforms. The FDIC has agreed to share losses on a portfolio of qualifying loans with IndyMac assuming the first 20% of losses after which the FDIC will share losses 80/20 for the next 10% of losses and 95/5 thereafter.

Aside from the deposits, the new IndyMac will be funded by secured loans from FDIC and $1.3bn of new cash equity from the buyers. The transaction is expected to close in the first quarter of 2009.

The buying group has applied for a federal holding company charter for its acquisition vehicle, according to news reports.

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