WASHINGTON — The Federal Deposit Insurance Corp. announced a third deal in which it provided financing for the sale of failed-bank assets.
The agency said Colony Capital Acquisitions in Los Angeles will own 40% of a new fund established to buy $1 billion of bad loans from 22 FDIC receiverships.
The FDIC will own the rest and will increase the fund's purchasing power by providing it with $233 million in guaranteed debt.
The sale follows two similar public-private deals the agency did last year. The FDIC, which announced the deal Friday, has hoped the financing structure will help open banks sell toxic loans, but so far it has only worked in disposing of failed-bank assets.
Colony Capital, which beat out 21 other firms trying to bid on the assets, will pay roughly $90 million for its share of the new venture, the FDIC said. The firm will service all of the loans in the new fund, which was formed as a limited liability company.
The assets are made up of 1,200 troubled commercial real estate loans from banks that failed over the last 18 months. Three-quarters of the loans are for properties in Georgia, California, Nevada and Florida.
Originally, the FDIC had planned to launch joint ventures with investors through the Obama administration's Public-Private Investment Program, a broad plan to match government resources with private capital to help institutions get toxic assets off their books.
But institutions balked at the potential prices they would receive for their troubled loans. Another component of PPIP run by the Treasury Department to help institutions purge their toxic asset-backed securities has similarly been slow to get off the ground.
In June the FDIC focused its efforts on loans it held in receivership. The agency announced its first deal in September, a partnership with Residential Credit Solutions of Fort Worth to control a $1.3 billion portfolio from the failed Franklin Bank in Houston. RCS paid about $64 million to own half the portfolio. The FDIC lent nearly $730 million to the shared venture.
It struck a similar deal in October, sharing control with four investors — led by Starwood Capital Group — of $4.5 billion in loans from Corus Bank in Chicago. The investors paid $554 million and the FDIC provided $1.39 billion in financing. In both deals the debt was guaranteed by the FDIC.
Still, officials maintain the program is not limited to failed banks. At a November press briefing, Chairman Sheila Bair said the FDIC hopes to launch the program for open-bank assets this quarter.
"Cleansing balance sheets is absolutely necessary to strengthen the industry's capacity to lend to businesses and consumers," she said.
