IndyMac sale may finally happen today
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The sale of Pasadena’s IndyMac Federal Bank is likely to be announced later today, according to sources close to the savings and loan, the private investors acquiring it and the Federal Deposit Insurance Corp.
The FDIC has been operating the former exotic-mortgage lender since IndyMac’s chief regulator, the U.S. Office of Thrift Supervision, seized it last July following a $1.3 billion run on deposits. At the time, it was the third biggest bank failure (adjusted for inflation) since the government began insuring deposits during the Great Depression.
The FDIC hoped to sell IndyMac by October, later moving the target date to Dec. 31. But as 2008 ran out no deal had been finalized despite ongoing talks with a New York investment partnership that includes J. Christopher Flowers, a buyout specialist known for targeting distressed banks; hedge-fund operator John Paulson, who made billions of dollars betting the housing markets would crash; and private-equity investor Steven Mnuchin, chairman of Dune Capital.
A source close to the partnership told me this morning that a deal was likely to be announced today. Sources at the FDIC and IndyMac confirmed that. They declined to be identified pending the FDIC’s formal announcement of the deal.
Few details of the transaction were available in advance, although sources have said the emerging institution would be chartered by the Office of Thrift Supervision, the Treasury Department arm that regulates S&Ls. One regulatory source said billions of dollars in troubled loans will be spun off to unburden the new institution, but the structure of that transaction wasn’t clear.
The FDIC last year managed to engineer takeovers of other wounded mortgage lenders by larger banks, such as JPMorgan Chase & Co.’s $1.9-billion purchase of Washington Mutual Bank. But private equity investors are a new twist and are sure to be scrutinized carefully.
I reported on July 26 that before IndyMac failed, its top executives had undertaken ‘Project Iron Man,’ an attempt to assemble a group of private-equity companies to pump cash into the thrift and become its controlling shareholders. From that report:
Sources at the bank and among potential bidders were guarded in discussing the effort, citing confidentiality agreements and the fact that some of the firms involved may participate in the FDIC’s planned auction of IndyMac, which the agency hopes to accomplish in 60 to 90 days. Project Iron Man appears to have reached only the initial stages when U.S. Sen. Charles E. Schumer (D-N.Y.) publicly questioned IndyMac’s stability in late June and criticized regulators’ lack of action. His remarks spooked some depositors, and IndyMac customers withdrew $1.3 billion in 11 days, even as private-equity firms were reviewing IndyMac’s operations behind the scenes.
As part of the government’s attempts to stabilize the financial system, the FDIC formally agreed in November to let private investor groups without bank charters bid for failing lenders.
IndyMac, which has 33 Southland branches, was among 25 banks and thrifts that failed last year.
--E. Scott Reckard
