January 28, 2009

IndyMac: Signals Possibilities for Investments in Failed, Troubled Banks

As noted by Cleary Gottlieb: “The year-end purchase of IndyMac by a PE/hedge fund consortium headlined some key elements for failed and troubled bank sales in the coming year, absent a major shift in policy by the Obama administration, including:

– Regulatory flexibility to pre-clear acquirors (through OCC shelf charters or OTS preliminary clearance) as appropriate purchasers of failed institutions.

– Renewed reliance on loss sharing to create appropriate incentives for private-party acquirors to manage assets to a least-cost result.

– Ownership structures that fit PE/hedge fund needs for reasonable liability boundaries and appropriate control levers. A number of workable structures have emerged, including Doral-type consortia, siloed funds, and individual control persons.”

We have posted a number of memos in our “Bank M&A” Practice Area that outline key implications for PE and hedge fund investors thinking about a failed or troubled bank deal.