January 2, 2009
The Federal Deposit Insurance Corp. said a holding company led by Steven Mnuchin, co-chief executive of private equity firm Dune Capital Management, agreed to buy IndyMac in a deal reached Wednesday and expected to close by the end of March.
The investors have formed a partnership, called IMB Management Holdings LP, that includes Dell Inc. founder Michael Dell's investment firm, MSD Capital.
"We have assembled a group of experienced private investors in financial services to acquire the former IndyMac and operate it under new management with extensive banking experience," Mnuchin said in a statement.
"We will inject significant private capital into IndyMac so that it can once again effectively serve its customers and communities."
Other investors in the partnership include five private equity firms or hedge funds: J.C. Flowers & Co.; Stone Point Capital; Paulson & Co.; a fund controlled by billionaire George Soros' Fund Management; and a fund controlled by Silar Advisors LP.
IndyMac has 33 bank branches in Southern California with about $6.5 billion in deposits, about half the company's total at the time of its failure. Other assets include a $157.7 billion loan servicing business, which collects mortgages and distributes them to investors, and a reverse-mortgage company, known as Financial Freedom.
As part of the deal, the FDIC agreed to assume losses on a some IndyMac's loans. Under a complex formula, the new investors would shoulder the first 20 percent of the bank's loan losses, with the FDIC taking on the majority of any losses thereafter.
In return, the investors agreed to continue a closely watched home-loan modification program launched by FDIC Chairman Sheila Bair in August.
The investors have received preliminary clearance from the federal Office of Thrift Supervision to run the bank as a federal savings association.
A final decision is expected in the coming weeks.
FDIC officials noted that private equity firms have bought up failed institutions before.
In the early 1990s, two failed banks - Bank of New England and CrossLand Federal Savings Bank - were sold to private equity firms.
Dune Capital was founded in 2004 by former Goldman Sachs Group Inc. partners Mnuchin and Daniel Niedich.
Flowers, who launched, then dropped, a bid to buy student lender Sallie Mae last year, also is a former Goldman Sachs partner.
Paulson & Co. made billions in profits in recent years by betting on the failure of risky home loans.
The proposed sale of IndyMac comes as regulators have eased restrictions on such purchases.
Previously, private-equity firms could not hold more than a 24.9 percent stake in a bank without becoming a bank-holding company.
IndyMac, which specialized in loans made with little down payment or proof of assets, was seized by the government in July after a run on the bank as the real estate bubble collapsed.
The failure of IndyMac, which had $32 billion in assets and branches throughout California, was the second-largest last year, trailing only the September failure of Washington Mutual Inc.
Losses to the FDIC's bank insurance fund are expected to range between $8.5 billion and $9.4 billion.
The Seattle-based thrift was the biggest bank to collapse in U.S. history, with around $307 billion in assets.
Washington Mutual was acquired by JPMorgan Chase & Co. for $1.9 billion.
A total of 25 U.S. bank failures in 2008 compare with three for all of 2007 and are far more than in the previous five years combined.
The next year of economic turmoil is expected to sink many more banks.