The Federal Deposit Insurance Corporation has reached an agreement to sell the banking operations of IndyMac Federal Bank FSB.
The failed institution will be sold to IMB HoldCo LLC — a thrift-holding company controlled by IMB Management Holdings LP — for $13.9 billion, an FDIC announcement late today said. The FDIC expects the sale to close during the first quarter.
The Office of Thrift Supervision announced its preliminary clearance of the sale based on IMB’s character, integrity, financial and managerial resources, and general business plan.
Further details of the transaction will be released upon the closing.
A consortium of private-equity investors led by Steven T. Mnuchin of Dune Capital Management LP owns IMB HoldCo. The consortium includes J.C. Flowers & Co.; Paulson & Co.; MSD Capital, L.P.; Stone Point Capital; SSP Offshore LLC; and SILAR MCF-I LLC.
The agreement, reached Wednesday, calls for the sale of the retail bank and its 33 branches with around $6.5 billion in deposits. It also includes the sale of the servicing platform and servicing rights on a $157 billion portfolio.
In addition, IMB will purchase IndyMac’s reverse lending subsidiary Financial Freedom, a $16 billion loan portfolio and $7 billion in securities.
The FDIC agreed to a loss-sharing provision on some loans, though it will receive a majority of cash flows generated on a $2 billion portfolio of construction loans and other receivables.
FDIC Deputy Director James Wigand, who was the lead negotiator in the transaction, explained that the sale was negotiated in a challenging environment for asset sales. He noted that IndyMac’s structure and aggressive lending as well as ailing California and Florida real estate markets combined to significantly impact losses.
IMB, a newly formed limited partnership, agreed to invest substantial additional capital into the holding company as part of the deal, bringing capitalization to $1.3 billion. It also agreed to bring in an experienced senior management team to oversee day-to-day operations.
The FDIC reported that it has mailed 32,274 loan modification offers to IndyMac borrowers out of 46,500 eligible mortgages. Modifications have been completed on 8,512 loans, while modification offers have been verbally accepted on 9,480 loans.
IMB agreed to continue the FDIC’s streamlined modification program — which reportedly increased the value of IndyMac loans by $423 million.
The Pasadena, Calif.-based thrift failed and was taken over by the FDIC on July 11.
IndyMac’s cost to the FDIC is projected at between $8.5 billion and $9.4 billion.
In the FDIC’s press release, IndyMac Chief Executive Officer John Bovenzi — who was brought in after it was seized — criticized IndyMac’s heavy reliance on Federal Home Loan Bank advances. He noted many of 2008’s failed banks had such a reliance.
“These secured borrowings and the associated prepayment penalties have the effect of increasing the costs to the FDIC and to uninsured depositors,” Bovenzi said in the statement.
Bovenzi will be replaced by Terry Laughlin, who will also serve as president when the deal is done.
