IndyMac Sold? - December 29, 2008

Is failed IndyMac Bank being sold? In a report released early Monday morning that answer seemed to be yes. In an article released by the New York Times on Saturday, is appears that the once-profitable bank, which was seized by the FDIC, could be purchased by a trio of private-equity firms.

The three major players, J.C. Flowers & Co., Dune Capital Management and hedge-fund operator Paulson & Co. were the leading candidates to obtain the insolvent bank, which was seized by the Federal Deposit Insurance Corp. back in early July.

At the time of their demise, IndyMac had more than $32B in assets related to mortgage industry, more than $19B in deposits and 33 banking branches throughout all of California. The collapse of IndyMac marked the second largest bank failure during the year, only behind Washington Mutual’s collapse back in September.

In the proposed deal, the equity firms would post nearly $14B in order to acquire the bank. However, the FDIC would need to set up a loss-sharing agreement. The FDIC estimates that the failure of IndyMac cost the agency nearly $9B. Deutsche Bank AG (DB) and Barclays Capital Inc. (BCS), the investment-banking unit of London-based Barclays Plc, are advising the FDIC on the sale.

The seizure of IndyMac by the FDIC came in July 11, after customers made a bank run and withdrew more than $1.3B in deposits over an eleven-day span. Of the 25 banks that have failed thus far this year, IndyMac is the only remaining one that the FDIC has yet been able to sell.

The potential sale of IndyMac to private firms comes as the government has reduced restrictions pertaining to theses types of sales. Previously, private firms could not hold a stake in a bank that exceeded a 24.9% stake. If that portion were exceeded, it would then have to become a bank-holding company, and would limit the potential investment spectrum of the firm to invest mainly within the banking industry.

For more information on the stock and options markets check out the wealth of information at BetterTrades.