Private equity seals $900m bank rescue

Blackstone, Carlyle, Centerbridge and WL Ross have joined forces with several co-investors – including UK charity The Wellcome Trust – to buy failed Florida-based BankUnited. The FDIC is currently evaluating 'the appropriate terms' to let more private equity firms acquire failed depository banks.

A consortium of private equity firms and co-investors has backed a $900 million buyout of Florida-based BankUnited. With 86 offices, BankUnited is the largest independent bank in Florida and the largest US bank to fail this year.

BankUnited: saved by private equity

Buyout firms The Blackstone Group, The Carlyle Group, Centerbridge Partners and WL Ross & Co joined institutional co-investors such as a UK-based charity The Wellcome Trust to buy the failed bank, which at the beginning of May had assets of $12.8 billion and deposits of $8.6 billion.

The consortium, led by ex-chairman and chief executive officer of New York-based North Fork Bancorporation John Kanas, won a four-month auction process run by the Federal Deposit Insurance Corporation (FDIC), the body that guarantees the safety of US savers’ bank deposits.

In a signal that private equity cash is seen as an increasingly important source of capital for the stricken banking system, the FDIC is currently evaluating “the appropriate terms” to allow more private equity firms acquire depository institutions that have fallen into receivership, the organisation said in a statement on Thursday.

“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,” said the statement.

BankUnited is the 34th FDIC-insured institution to fail in the US since the start of 2009. In December MatlinPatterson, a distressed debt specialist, agreed to pay $250 million for a 70 percent stake in struggling Flagstar Bancorp, a publicly held saving bank that received a $250 million cash infusion from US’ Troubled Assets Relief Program.

In January a consortium including buyout firms JC Flowers, Stone Point Capital, MSD Capital and Dune Capital acquired failed American mortgage lender IndyMac for $13.9 billion. So far, club deals have been the prevailing means for private equity firms to circumvent federal regulations restrictions on the stake sizes companies not regulated as banks may own.

The UK saw its first private equity-backed acquisition of a deposit-taking bank earlier this month, when financial services-focused buyout firm Anacap Financial Partners acquired Ruffler Bank.

The Ruffler acquisition was not a distressed deal: including the £80 million (€91 million; $127 million) the bank is to receive from Anacap, it will have a tier one capital ratio of more than 40 percent, one of the highest in the country.