WASHINGTON, D.C. — The Federal Deposit Insurance Corp. (FDIC) has sold a 40 percent equity interest in a limited liability company created by the federal agency to hold assets from 22 failed bank receiverships. The LLC controls a portfolio of approximately 1,200 distressed real estate loans with an unpaid principal balance of $1.02 billion. Approximately 75 percent of the properties are located in California, Florida, Georgia and Nevada. All of the loans are from banks that have failed within the past 18 months.
The buyer, Los Angeles-based Colony Capital Acquisitions, was selected from a group of 21 qualified bidders. Colony paid approximately $90.5 million in cash for the 40 percent stake, which equates to approximately $448.8 million. Colony will also serve as the managing partner of the LLC and will be responsible for the management, servicing and ultimate disposition of the assets.
The FDIC will retain a 60 percent stake in the LLC. It also provided approximately $233 million of corporate guaranteed notes to serve as working capital. Holding a stake in the companies created by bank failures provides a way for the FDIC to find buyers who have the ability to turn around distressed loans, and it provides a way for the FDIC to replenish its emergency funds.
“We provide the leverage — the FDIC-guaranteed loan that is in the LLC — and it provides capital for whomever is running the LLC for us,” says David Barr, a spokesman for the FDIC. “Since it is guaranteed, the FDIC can then go and sell that note on the secondary market, and that provides the FDIC with liquidity that we can use to resolve future bank failures.”
— Coleman Wood