The Federal Deposit Insurance Corporation (FDIC) announced on February 26 the conclusion of the sale of $1.45 billion of performing and nonperforming residential and commercial construction loans in distressed markets through the use of two private/public partnership transactions. In the two recent transactions, the FDIC placed the loans, which were exclusively from the failed First National Bank of Nevada, into a limited liability corporation (LLC). The FDIC retained an 80% interest in the assets with the winning bidder acquiring an initial 20% stake. Once certain performance thresholds are met, the FDIC's interest drops to 60%. Any future expenses and income will be shared between the purchaser and the FDIC based on their respective percentage ownership interests. By retaining a participation interest in the structure, the FDIC as receiver will benefit in the future return of the portfolio in addition to receiving immediate proceeds from the purchaser for its 20% interest in the portfolio.
The closure of this sale brings the total amount of assets sold utilizing private/public partnership transactions to approximately $3.2 billion over the last year, in five separate transactions. Based on “the success of the program and the positive feedback received from the private sector,” the FDIC anticipates it will utilize this and similar sales strategies in the future.