On March 31, 2009 BankUnited had nearly $4.8 billion in advances from Federal Home Loan Bank on its balance sheet. What happened to that obligation in the sale of BankUnited to prominent private equity underwriters (PEU's)? The press release is unclear in this regard. It states:
BankUnited Financial Corporation (bank holding company for shuttered BankUnited) and the interests of equity, debt holders or other creditors of BankUnited Financial Corporation are not included in the closure or receivership of the institution. Any claims by equity holders were not acquired by the assuming institution.
BankUnited shareholders were zeroed out, helping to make the deal more attractive to Blackstone and The Carlyle Group. The FDIC expects the deal to cost it $4.9 billion. They didn't spell out a breakdown for the nearly $5 billion subsidy. How much is upfront money to the PEU boys and how much is loan loss sharing?
If shareholders and the FHLB got zeroed out, BankUnited instantly became the best capitalized bank in the U.S.
PEU owned BankUnited announced a new strategy, focusing on corporate loans. Private equity needs a captive bank with huge amounts of debt refinancing between now and 2014. Branches become disposable in such a scenario.
While it's possible the FHLB loans were transferred in the deal, some other arrangement could've been made. Debt holders can be crammed down before or during bankruptcy. The FDIC has questions to answer.
It may end up like AIG, a long process with copious amounts of Obama minion obfuscation. I can't wait for Tim Geithner to put PEU's, apple pie and Chevrolet together in one sentence.
Wave a flag, shed a tear for the patriotic PEU boys! They're saving "George Bailey" using the community chest. Behind the scenes, they plot how to grow Pottersville tenements? It's an Obama PEU Life!