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May 22, 2009 2:24 PM

Skadden, Simpson Lead Ground-Breaking BankUnited Deal

Posted by Zach Lowe

Over the last month, we've talked to lots of banking lawyers who say one area is keeping them very busy: private equity clients keen on swooping in and buying failed or failing banks.

Historically, federal regulations have limited private equity firms to no more than 25 percent ownership in banks out of concern that the firms operate with more risk than is appropriate for a commercial bank. And in recent weeks, The Federal Reserve told private equity firms it won't allow them to own a majority stake even if a firm creates a new investment vehicle to control the bank and runs it as a separate entity. 

Still, the shift that began in January when the Federal Deposit Insurance Corp. unloaded the failed IndyMac to a consortium of private investors picked up momentum late Thursday, when the FDIC announced the sale of Florida-based BankUnited Financial Corp. to a group of private equity funds led by the Carlyle Group and Blackstone Group, according to Bloomberg and the New York Times.

None of the private equity firms will own more than 24.9 percent of the bank--the upper limit for private firms, Bloomberg says. The exact division of the bank has not been made public, but the FDIC's move to give control of a bank to a group of private equity investors has experts wondering if a larger policy shift is in the works.

Indeed, the FDIC said Thursday it plans to announce new guidelines for private investors interested in buying up chunks of banks.

John Kanas, the former chief executive of North Fork Bancorp who helped that bank grow by acquiring smaller banks, will manage BankUnited. He was advised by a Skadden, Arps, Slate, Meagher & Flom team led by partners William Sweet, David Ingles and William Rubenstein--all members of the firm's financial institutions group. 

Simpson, Thacher & Bartlett advised longtime clients Blackstone, Carlyle and Centerbridge, another major investor in the bank.

Wachtell, Lipton, Rosen & Katz advised WL Ross & Co., another private equity firm in the group of buyers. The group won BankUnited at auction, beating out a rival group led by Goldman Sachs and Toronto-Dominion Bank. Interestingly, Toronto-Dominion is a regular Simpson client.

Lawyers on the deal declined to comment, deferring to the FDIC's statement.

BankUnited has about $8.6 billion in deposits, according to Bloomberg. The bank had lost money for three straight quarters, mostly due to mortgage defaults.

The FDIC estimates that it will absorb a $4.9 billion loss on the sale, Bloomberg says; it lost nearly $11 billion in the IndyMac transaction.

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