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Robert Trigaux

BankUnited Financial, Florida's biggest bank, taken over by W.L. Ross-led investor group

Bankunitedlogo Wake up and good morning. The biggest financial institution headquartered in Florida, BankUnited Financial of Coral Gables, was put out of its misery last night by bank regulators in a move that will cost the Federal Deposit Insurance Corp. almost $5 billion. We all knew this was coming, so there's no surprise here. But the failure of Florida's biggest institution (it was a $13-billion-asset federal savings bank, not a commercial bank), a victim of risky mortgage lending, is another blow to a state that essentially has no homegrown banking industry of size and a long reputation of being known as a "banking colony" -- a state dominated by banks from elsewhere.

So let's get to it. What happens now? A bunch of super-rich bidders wanted BankUnited, and the FDIC complied by letting the bank fail first (like bankruptcy, it eliminates obligations bidders would have had to honor had they bought BankUnited before failure). These big private investors have a lot of money and they want to get into the ailing banking industry in a big way, while pressed federal regulators are willing to bend backwards to let new private money help fill the capital void facing banks.

The buyer? BankUnited was sold by the government for $900 million to an investor group led by former North Fork Bancorp Chairman and CEO John Kanas. Its 85 branches -- including some in  the Tampa Bay area -- reopens today as a newly chartered savings bank called BankUnited, with Kanas at the helm.

And the money behind Kanas? It includes some heavyweights, from the Blackstone Group and the Carlyle Group to Centerbridge Partners and WL Ross & Co., Ross is a private-equity firm run by billionaire investor Wilbur Ross. The Miami Herald adds some other names in the investor group, including L.P. LeFrak Organization, The Wellcome Trust, Greenaap Investments Ltd. and East Rock Endowment Fund.

Here's some intrigue from the Washington Post. A new federal investigation revealed that the bank's regulator, the Office of Thrift Supervision, allowed the firm to cover up its financial weakness. The regulators had ordered BankUnited to raise additional capital but the institution was unable to do so before a deadline. So, according to the investigative report, an OTS senior deputy director allowed the Florida institution to raise the money after the deadline and then issue a financial report stating that the money had been raised before the deadline. That "backdating" of capital was misleading to shareholders.

According to Bloomberg News, none of the members of the buyer’s group will hold more than 24.9 percent control. Kanas' group beat out at least one other bid from Goldman Sachs Group Inc. and Canada's Toronto-Dominion Bank.

On a conference call, says Bloomberg, Kanas said he contacted the FDIC to express an interest in buying BankUnited four months ago. Unlike IndyMac, the giant California institution that was seized in July and not sold for five months, BankUnited’s seizure and sale took place on the same day.

BankUnited’s acquisition marked "first time, to my knowledge, that private capital has come in on such short notice and at such size and begun to run a bank literally the next day," Kanas said. While other potential suitors would have instituted "drastic consolidation" by closing branches and eliminating jobs, Kanas said his group would avoid most of that.

In another sign of federal flexibility, the New York Times reports the FDIC also agreed to share in any losses on $10.7 billion of BankUnited’s assets, which mainly consist of subprime residential mortgages made at the height of the housing boom.

-- Robert Trigaux, Times Business Columnist

[Last modified: Tuesday, June 1, 2010 12:25pm]

    

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