White Knight for BankUnited?

WSJ:

TD Bank Financial Group has entered the fray as a potential suitor for BankUnited Financial Corp.

The BankUnited FSB unit faces a deadline next week from the U.S. government to raise capital or find a buyer. If it fails, the banking unit could be seized by regulators. BankUnited has been crippled by the Florida housing collapse and a $9.5 billion portfolio of troubled mortgages. The bank couldn’t be reached to comment.

Rolfe here. The $9.5 billion loan portfolio is primarily option ARMs, which was BankUnited's (BKUNA) bread ‘n buttah.

Toronto-based TD is teaming with Goldman Sachs Group Inc. on the potential offer, people familiar with the situation said. Goldman might be interested in some of BankUnited’s distressed assets, these people said. A TD spokesman declined to comment.

BKUNA’s losses are so substantial, potential investors would probably look to the government to absorb a large portion of them.

Comments

[Mark from R...:]

You could do a better job of explaining how the FDIC sells a failed bank's deposits, branches and assets. Many are assuming that the publicly traded holding company is going to be purchased by these bidders. That could or could not happen, but as with Downey and Indy Mac and other banks with such bad assets, the usual way is for the bank to fail and then for the FDIC to sell the deposits and assets. The bank holding company then files for bankruptcy since it's primary asset -- the bank -- was seized and it is left with substantial debt at the holding company level without any assets to service it.

Apr 27 02:43 PM

[IndyRockStar76:]

mark,

If the bank is seized what happens to the shareholders? Do we lose everything or do we profit from the pursuing auction?

Apr 29 09:36 AM

[Mark from R...:]

Your stock will most likely end up worthless. Usually after a bank holding company has its bank taken from it, the holding company files bankruptcy since most of its assets are in the bank (which it no longer owns). The holding company may have a few assets, but they also have millions of debt. I believe BankUnited has over $900 million of sub debt at the holding company level. Since the holding company has few assets to service this debt, they declare bankruptcy. The common stock usually winds up worthless along with most of the preferred stock and debt. The FDIC also has the right to sue the holding company for any losses that the FDIC insurance fund suffers from taking over the bank. So the FDIC get first claim on the directors and officers insurance policy.

I used to work for the FDIC and it's one of my pet peeves that the financial press does not do an adequate job of explaining how this process works, especially when most of these banks have publicly traded stock and the headline flashes "XYZ looking to buy ABC Bank."

There have been a couple of cases where a bank was sold without failing first, like with Wachovia and National City, but BKUNA is in much worse shape. At least Wachovia had a brokerage operation and money management arm. I do not believe there is any compelling reason for the FDIC or Treasury to save the stockholders of BKUNA.

On Apr 29 09:36 AM IndyRockStar76 wrote:

> mark,
>
> If the bank is seized what happens to the shareholders? Do we lose
> everything or do we profit from the pursuing auction?

May 01 02:18 PM

[joeMc:]

Wasn't WaMu seized and sold without failing first?

May 21 06:27 PM