Wednesday, March 10, 2010

FDIC Issues $1.38 Billion of Bonds Backed by Assets


March 10, 2010, 5:26 PM EST

By Jody Shenn

March 10 (Bloomberg) -- The Federal Deposit Insurance Corp. sold $1.38 billion of guaranteed notes backed by construction loans and seized property from a failed bank, according to a person familiar with the offering.

The debt was broken into three parts, with an $850 million portion that matures no later than October 2012 pricing to yield 21 basis points more than interest-rate swaps, said the person, who declined to be identified because terms aren’t public. Barclays Capital underwrote the sale, the person said.

The debt represents part of the assets the FDIC acquired after seizing Chicago-based Corus Bank in September, the person said. The offering was one of two sales planned for this month of bonds tied to loans the FDIC sold partly last year through so-called structured loan sales, people familiar with the matter said last month.
The pace of bank failure will “pick up this year and is going to exceed where we were last year,” FDIC Chairman Sheila Bair told reporters last month.

Last week the agency sold $1.81 billion of guaranteed debt backed by mortgage securities from failed banks, as it begins to tap the bond market to raise cash after the collapse of 193 banks since 2007. The FDIC also may sell bonds linked to the assets of Houston-based Franklin Bank this month, the people said.

Two Other Portions

The bonds in the latest offering carry no coupons, the person said. About $377 million of notes that mature no later than October 2013 priced to yield 24 basis points more than the benchmark euro-dollar synthetic forward rate, while $150 million of debt maturing no later than October 2011 sold at a spread of 18 basis points more than swaps.

In October, a group led by Starwood Capital Group LLC and TPG agreed to buy an interest in $4.5 billion of Corus’s real estate assets, mainly construction loans for condominiums, paying $554 million for 40 percent of the equity in a special- purpose company. Corus was a unit of Corus Bankshares Inc.

In such structured-loan deals, the FDIC places the assets of a failed bank in a special-purpose company, then sells some of the equity and keeps the rest while guaranteeing lending from the seized institution to the vehicle used to finance the remainder of its purchase, providing leverage to the private- share buyers.

--Editors: Charles W. Stevens, Richard Bedard
To contact the reporter on this story: Jody Shenn in New York at
To contact the editor responsible for this story: Alan Goldstein at