FDIC closes on a $1.45 Billion Structured Sale of Distressed Loans MortgagePress.comFDIC, commercial construction loans, distressed markets, First National Bank of Nevada, James Wigand
The Federal Deposit Insurance Corporation (FDIC) has announced
the conclusion of the sale of $1.45 billion of performing and
non-performing residential and commercial construction loans in
distressed markets through the use of two private/public
partnership transactions. These structured sales utilize the asset
management expertise of the private sector, while retaining for the
FDIC a participation interest in all future cash flows generated by
the workout of the assets over time.
In the two recent transactions, the FDIC placed the loans, which
were exclusively from the failed First National Bank of Nevada,
into a limited liability corporation (LLC). The FDIC retained an 80
percent interest in the assets with the winning bidder picking up
an initial 20 percent stake. Once certain performance thresholds
are met, the FDIC's interest drops to 60 percent. The future
expenses and income will be shared on the percentage ownership of
the purchaser and the FDIC.
"The FDIC is drawing on its previous successes and those of the
Resolution Trust Corporation," said James Wigand, Deputy Director,
Division of Resolutions and Receiverships. "During the last banking
crisis, when asset values were similarly difficult to ascertain,
these types of structures ultimately resulted in superior
recoveries relative to the then-depressed market valuations."
By retaining a participation interest in the structure, the FDIC
as receiver will benefit in the future return of the portfolio in
addition to receiving immediate proceeds from the purchaser for its
20 percent interest in the portfolio.
The successful bidders on the two transactions were Diversified
Business Strategies and Stearns Bank NA. The FDIC hired the
financial advisor Keefe Bruyette Woods to market the LLC to
potential bidders. In all, 18 separate bidders submitted 30 unique
bids for both pools of loans.
The closure of this sale brings the total amount of assets sold
utilizing private/public partnership transactions to approximately
$3.2 billion over the last year, in five separate transactions.
Based on the success of the program and the positive feedback
received from the private sector, the FDIC anticipates it will
utilize this and similar sales strategies in the future.
For more information, visit www.fdic.gov.