Friday, October 29, 2010

BankUnited's Multiple Milkings: $2.3 Billion in FDIC Cash

BankUnited (BU) filed for a $300 million IPO, less than the predicted $500 million amount.  BU's SEC filings show how the bank's private equity owners benefited.  When the original deal closed, with $4.9 billion in FDIC loss sharing, new owners imposed a transaction fee.  The Carlyle Group, Blackstone, Centerbridge and WL Ross charged BU $20 million.

In consideration of the Key Parties conducting the financial and structural analysis, due diligence investigations, and negotiations described above, the Company will pay to each Key Party the following transaction fee:

(a)       to Blackstone a fee of $5,284,360.19

(b)       to Carlyle a fee of $5,284,360.19

(c)       to Centerbridge a fee of $4,146,919.43

(d)       to WL Ross a fee of $5,284,360.19
Each of the above parties has the right to appoint a board member and have a non-voting representative in attendance.

The Carlyle Group's BU holdings are in two funds, DBD Cayman, Ltd. and TGC Holdings, LLC.  Carlyle's holdings in Hampton Roads Bankshares sit offshore in DBD Cayman.  This FDIC approved offshore corporate investments in failed or struggling U.S. banks.  Highlights from the S-1 include:

BankUnited made a $120 million profit in eight short months.

On September 17, 2010, BU declared a quarterly dividend of $14.0 million. In addition, on October 19, 2010, the bank declared a special one-time dividend of $6.0 million.
That's two $20 million bleedings by investors.  Not bad for a year and a half. But it pales relative to Uncle Sam's generosity.

Cash received from FDIC related to business combination, net--$2,274,206,000

At June 30, 2010, BankUnited was one of the most well-capitalized banks in the United States

It's no wonder, with $2.3 billion in FDIC cash.  Investors put up $945 million, roughly one third of initial capitalization.  What did the FDIC get?  Warrants for 10% of the company.  Sheila Bair should be embarrassed.

Update 1-26-11:  BankUnited is expected to go public this week.   PEU Investors are the primary sellers of 26 million shares of stock at an expected price of $23 to $25.  How will Uncle Sam get back $2.3 billion in FDIC cash? They won't.  Others got rich on the deal. 

ESPN aired the University of Miami-UNC basketball game.  Miami's home arena is the BankUnited Center.  Miami President is Donna Shalala, former Clinton official.  The facility opened in 2003.  No name change was necessary given Uncle Sam's generous aid to BankUnited.

Update 2-12-2011:  Who got rich on the BankUnited IPO?  Not Uncle Sam, who put up 2/3 of the initial recapitalization...

Update 3-9-12:  Palm Beach Post finally sniffed out Carlyle and company's sweetheart deal.