Starwood Capital Group gets the assets in a consortium with TPG capital, Perry Capital and WLR LeFrak (another Wilbur Ross company – this guy is cleaning up in the FDIC private equity bonanza).
Here’s the press release:
The Federal Deposit Insurance Corporation (FDIC) has signed a bid confirmation letter to sell a 40 percent equity interest in a limited liability company (LLC) created to hold assets of Corus Bank, NA, Chicago, Illinois, to a consortium managed by Starwood Capital Group (Starwood) that also includes TPG Capital, Perry Capital and WLR LeFrak.
The sale was conducted on a competitive bid basis, and the best and final offers were received on Wednesday, September 30, 2009. A total of eight bidders submitted bids to purchase an ownership interest in the LLC, to which the FDIC as Receiver of Corus will convey a portfolio of predominantly performing and non-performing construction loans and real estate owned (REO) assets with an unpaid principal balance of approximately $4.5 billion. The FDIC initially will hold a 60 percent equity interest in the LLC.
The bid received from the consortium was determined to be the offer that would result in the greatest return for the receivership of all competing bids. Corus Bank failed on September 11, 2009, and the FDIC immediately entered into a purchase and assumption agreement with MB Financial Bank, National Association, Chicago, Illinois, to assume all of the deposits of the institution and approximately $3 billion of the assets, comprised mainly of cash and marketable securities. This transaction completes the sale of the majority of the remaining assets of Corus Bank.
The expected closing date is in mid-October, consistent with the timeline previously provided by the FDIC.
Corus was the big fish amongst a trio of failed banks which went bust on 11 September 2009 (see my links post). At the time, only $3 billion of the assets were disposed of via MB Financial. The FDIC was forced to hold the other $4 billion in assets for later disposition. The Starwood-TPG-Wilbur Ross trio came away with the assets.
Wilbur Ross was also involved in the giveaway known as BankUnited (see my post “BankUnited goes bust and is replaced by BankUnited”). Back in August, I called this and other Private Equity transactions the socialization of losses.
Imagine you are Sheila Bair. You have shuttered 80-odd institutions this year and you realize that 150, 200, maybe 300 more institutions could fail still. No way on earth does your organization have the manpower to deal with this avalanche of bank failures without sloughing the assets off on willing buyers. How do you entice those buyers? In a word, price.
It’s what is known as a sweetheart deal. There were a number of bidders for Guaranty including US Bank, and a private-equity consortium led by Gerald Ford which included Blackstone, Carlyle and TPG. Yet, the deal went to BBVA in a loss-share agreement that caps their exposure at 20%? I ‘d like to get in on a deal like that. If you are a private equity buyer, you’re probably chomping at the bit for more deals like this.
And this will continue to be an inevitability for an FDIC short of cash. If you are a large private equity company, you are probably going to be making a shed load of cash very soon.