Alert
Alert
06.10.10
The Federal Deposit Insurance Corporation has released additional guidance regarding qualifications for failed bank acquisitions by private investors.
This Advisory provides guidance to private equity investors interested in acquiring or investing in failed banks in light of the FDIC’s recently released FAQs relating to its Final Statement of Policy on Qualifications for Failed Bank Acquisitions. For an overview of the Final Statement and key issues facing private equity investors in financial institutions (including potential transaction structures and certain regulatory considerations), please see our earlier Client Alerts of July 10, 2009 and September 8, 2009.
The Final Statement
The Final Statement outlines certain requirements for private investors in companies that acquire failed insured depository institutions from the FDIC. These requirements include capital commitments, continuity of ownership requirements, source of strength requirements, cross support requirements, restrictions on transactions with affiliates, and secrecy law jurisdiction considerations.
Since the Final Statement was adopted in August of 2009, private equity firms have explored various avenues to invest in failed depository institutions. Of particular importance to private equity investors are two exemptions from the requirements of the Final Statement. First, the Final Statement exempts investors in partnerships or similar ventures with bank or thrift holding companies or in such holding companies (excluding shell holding companies) where the holding company has a “strong majority interest” in the acquired bank or thrift and an established record for successful operation of insured banks or thrifts (the “strong majority interest exemption”). Second, the Final Statement exempts investors with 5% or less of the total voting power of an acquired depository institution or its bank or thrift holding company, provided there is no evidence of concerted action by these investors (the “de minimis investor exemption”). The FAQs clarify these two exemptions as well as provide additional guidance on the application of the Final Statement to recapitalization transactions, requirements for offshore investors and information requirements applicable to investors holding 5% or less of voting equity.