After more than a week of market speculation, the Federal Deposit Insurance Corp. (FDIC) announced a nearly $14 billion deal Friday to sell IndyMac Federal Bank to a private-equity consortium led by the head of Dune Capital Management.
IMB HoldCo, which Dune chief executive Steven Mnuchin formed along with J.C. Flowers & Co. and Paulson & Co., agreed to buy the battered Pasadena, Calif., lender for $13.9 billion and to recapitalize the $26 billion-asset thrift with roughly $1.3 billion in cash.
Though the FDIC moved closer to ending one of its toughest resolutions in recent memory, the transaction still could cost the agency more money. Under a loss-sharing agreement, the new holding company would cover 20% of losses on a pool of IndyMac loans, and the FDIC would bear the vast majority of the remaining losses.
Overall, the agency estimated that the failure of IndyMac Bancorp will cost $8.5 billion to $9.4 billion, potentially topping a prior estimate of $8.9 billion. Losses include a $6.3 billion payment to the Federal Home Loan Bank of San Francisco for its advances to IndyMac and $341.4 million in penalties for paying off these advances early.
"The current economic climate is challenging for selling assets, but this agreement achieves the goals that were set out by the" agency when it was named IndyMac's conservator, James Wigand, a deputy director in the FDIC's receiverships division and the deal's lead negotiator, said in a press release.
The Office of Thrift Supervision, IndyMac's federal regulator, said in a press release Friday that it had given the deal preliminary approval.
The deal, which is expected to close in late January or early February, includes the thrift's 33 branches, with $6.5 billion in deposits; a $16 billion loan portfolio and $6.9 billion securities portfolio; rights to a mortgage servicing portfolio worth more than $157 billion; and IndyMac's reverse mortgage servicing platform.
The consortium includes seven investors in all. In addition to Mnuchin, J.C. Flowers, and Paulson, MSD Capital, Stone Point Capital, SSP Offshore, and an affiliate of Silar Advisors, contributed capital.
Mnuchin, a former partner at Goldman Sachs Group, is to be the chairman and chief executive of the holding company, the FDIC said. The owners plan to install Terry Laughlin as the chief executive of the new thrift operation. Laughlin was formerly the chairman and CEO of Merrill Lynch Bank and Trust, a $35.8 billion-asset thrift owned by the investment house.
The agency said the new owners of IndyMac would continue to offer a streamlined loan modification program begun by the FDIC in late August. It said the program had achieved estimated savings of $423 million and helped 18,000 borrowers.
The deal with Dune Capital had been reported to be held up over concerns at Fannie Mae about whether the buyers or the FDIC would pay the government-sponsored enterprise as much as $1 billion for loans it had bought from IndyMac that had not been properly underwritten.
But an FDIC spokesman said Friday that, though the agency continues to work with the GSE to settle the loan repurchase issue, this did not delay the deal.
"At no time have Fannie Mae or Freddie Mac been responsible for a delay in the bidding process," the spokesman said.