BUSINESS ALERT
CURRENT LEGAL ISSUES FOR THE FINANCIAL SERVICES COMMUNITY
SPRING, 2010 Vol. 5, No. 6
PURCHASING ASSETS FROM THE FDIC
By: Harriet B. Alexson (949.250-9664)
hbeth@alexsonlaw.com
©2010. All Rights Reserved.
The Federal Deposit Insurance Corporation in its corporate capacity and in its capacity as receiver or conservator for failed financial institutions (in any capacity, the “FDIC”), may offer for sale various types of assets, including (without limitation) securities (such as stocks, corporate and municipal bonds, asset-backed securities, U.S. Treasury and other agency securities), mortgage servicing portfolios, mortgage servicing platforms and related assets, loans, loan origination platforms and related assets, shared national credits (interests in syndicated loans), participation interests and certificates, interests in structured transactions, and credit card receivables (“Assets”). For any particular sale of Assets, the FDIC will invite certain qualified bidders to participate. Before an entity can participate in any Asset sale, the FDIC must determine that the entity is qualified to bid (“Qualified Bidder”). The FDIC may determine that an applicant is qualified based upon certain certifications, as more specifically set forth on the Qualification Request – Appendix 1.
The Qualification Request sets forth certain requirements to obtain such Qualified Bidder status. Please find below some selected criteria the Qualified Bidder must satisfy (one or more of the criteria discussed below).
(a) The undersigned is a corporation, partnership, limited liability company or business trust with a net worth in excess of $5,000,000 determined in accordance with Generally Accepted Accounting Principles, consistently applied (“GAAP”).
(b) The undersigned is a/an: bank (as defined in Section 3(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”)), savings and loan association or other institution (as defined in Section 3(a)(5)(A) of the Securities Act), whether acting in its individual or fiduciary capacity; broker dealer registered pursuant to Section 15 of the Securities Exchange Act of 1934, as amended; insurance company (as defined in Section 2(13) of the Securities Act); investment company registered under the Investment Company Act of 1940, as amended (the “1940 Act”); business development company (as defined in Section 2(a)(48) of the 1940 Act); or private business development company (as defined in Section 202(a)(22) of the Investment Advisers Act of 1940, as amended).
(c) The undersigned is a trust with a net worth in excess of $5,000,000 determined in accordance with GAAP, that was not formed for the purpose of acquiring specific Assets from the FDIC and whose decisions are directed by a person who has such knowledge and experience in financial and business matters that she or he is capable of evaluating the merits and risks of an investment in any Assets on which it submits a bid.
(d) The undersigned is a natural person whose individual net worth, or joint net worth with that person’s spouse exceeds $1,000,000.
(e) The undersigned is a business entity all of whose equity owners meet the criteria on one of clauses (a) through (d) above.
(f) The undersigned is a natural person who has an individual net income in excess of $200,000 in each of the two most recent years, or who has joint net income with such person’s spouse in excess of $300,000 in each of the two most recent years, and who has a reasonable expectation of reaching the same income level in the current year.
(g) The undersigned is qualifying to offer to acquire only (i) securities issued by it or (ii) securities issued by a wholly-owned or majority-owned subsidiary of it.
Please note that I have selected the above-referenced criteria based upon the entity structuring issues we address with our private equity investor teams. Please note that additional criteria will apply as further set forth in Appendix 1. Contact this office for further information, if you wish to learn more about how the FDIC is resolving the assets of financial institutions, under supervision, or, those which assets have already been taken over, in whole or in part, by the FDIC.