Wednesday, May 26, 2010

Goldman Sachs Seeking to Invest in Company to Buy Failed Banks

Bloomberg News

May 25 (Bloomberg) -- A Goldman Sachs Group Inc. private equity fund is seeking to join Oaktree Capital Management LP and the Illinois teachers’ pension fund as an investor in a company planning to buy failed U.S. banks, according to public records.

Goldman Sachs applied to acquire as much as 25 percent of SKBHC Holdings LLC, a Corona del Mar, California-based firm trying to win approval to become a bank holding company, according to an announcement on the Federal Register website. Oaktree is also seeking 25 percent of the company and the Illinois fund voted to invest $100 million.

SKBHC is trying to purchase Starbuck, Minnesota-based Starbuck Bancshares Inc. and acquire assets and liabilities from failed U.S. depositories, the company said in its application to the Federal Reserve. Scott Kisting, the former co-head of global banking at Merrill Lynch & Co., is SKBHC’s chairman and chief executive officer, according to the application.

U.S. banks are collapsing amid losses on residential and commercial real estate loans. The FDIC’s list of problem lenders has ballooned to 745, the most since 1992. FDIC Chairman Sheila Bair has said she expects the number of failures in 2010 to exceed last year’s total of 140.

Andrea Raphael, a Goldman Sachs spokeswoman, declined to comment. A telephone message left for an attorney listed on SKBHC’s application with the Fed wasn’t returned. Neither was a message left at an address listed as SKBHC’s headquarters in records filed with the California Secretary of State’s office.
SKBHC’s application to the Federal Reserve listed GS Capital Partners VI Fund LP and “certain related funds” among its potential stakeholders.

Teachers’ Role

The Teachers’ Retirement System of the State of Illinois voted to invest in SKBHC, the fund said in a May 21 statement. SKBHC told the board it plans to raise $1.25 billion, said Dave Urbanek, a spokesman for the Springfield, Illinois-based retirement fund.

“The return that is anticipated long-term, that is something that would be helpful to the retirement fund,” Urbanek said in a telephone interview.

The retirement system had $32 billion in assets as of Dec. 31, it said in a statement.

SKBHC plans to buy a failed bank with assets of up to $10 billion within the first year of its operation, according to a letter Goldman Sachs sent to the Fed about its application to invest in SKBHC. The New York-based investment bank will be a passive, non-controlling investor, according to the letter.

Starbuck Assets

Starbuck, the first bank SKBHC is trying to buy, operates the First National Bank of Starbuck, which had $18 million in assets as of March 31, according to Federal Deposit Insurance Corp. records. The town is about 137 miles northwest of Minneapolis.

Other investors in the company are expected to include Los Angeles-based Oaktree Capital, which has $73 billion in assets under management, according to SKBHC’s application. SKBHC said Oaktree would take an almost 25 percent stake in the bank holding company.

A representative who answered the telephone at Oaktree said the firm declined to comment.
SKBHC also listed San Francisco-based private equity firm Friedman Fleischer & Lowe LLC as an expected investor. A message left with Tully Friedman, co-founder, chairman and chief executive officer of Friedman Fleischer, wasn’t immediately returned.

To contact the reporter on this story: Brian Louis in Chicago at blouis1@bloomberg.net .