Washington: The Federal Deposit Insurance Corp. has agreed to sell a 40 percent stake in a portfolio of Corus Bank assets for USD 554.4 million to a private-equity consortium led by Starwood Capital Group.
The investor group also includes TPG Capital, Perry Capital and WLR LeFrak. The FDIC initially will hold a 60 percent stake in the portfolio valued at USD 831.6 million.
The FDIC said on its Web site late on Tuesday that it received eight bids for a stake in the portfolio, which includes construction loans and real estate-owned assets with an unpaid principal balance of about USD 4.5 billion. It determined that the consortium`s bid — which values the assets at USD 2.72 billion or 60 cents on the dollar — would result in the greatest return for the agency.
Federal regulators in September seized Corus Bancshares Inc, a major Chicago-based lender to condominium, office and hotel projects, adding it to the long list of banks that have succumbed this year to the recession and waves of loan defaults.
The FDIC took over Corus Bank, which had USD 7 billion in total assets and USD 7 billion in deposits. Corus Bank`s closure is expected to cost the fund that insures bank deposits USD 1.7 billion. Chicago-based MB Financial Inc. took on Corus Bank`s deposits, re-opened its branches under the MB Financial Bank name, and agreed to buy about USD 3 billion of its assets.
The Starwood transaction, expected to close in mid-October, completes the sale of the majority of the remaining assets of Corus Bank.
The FDIC will provide nearly USD 1.39 billion worth of zero-coupon debt, matching the amount of equity in the deal. It also will provide up to USD 1 billion in financing over the next three to five years to fund construction of incomplete buildings, operating deficits in completed buildings and other asset-related working capital needs.
Barclays Capital advised the FDIC on the sale.
Ninety-eight banks have failed so far this year as losses have mounted on commercial real estate and other soured loans amid the most severe financial climate in decades. The FDIC said last week that the failures have cost it about USD 25 billion.
In September, the FDIC opened the door wider for private investors to buy failed financial institutions. The FDIC`s board voted to reduce the cash that private equity funds must maintain in banks they acquire.
Private-equity funds have been criticized as excessive risk-takers. But with fewer healthy banks willing to buy ailing institutions, the banking crisis has softened the FDIC`s resistance to private buyers.