In a move that can establish a foothold in the US retail banking industry, Fortress Investment Group, a private equity and hedge fund company with $26.5 billion assets, is joining hands with other private equity investors, Crestview Partners and Lightyear Capital, to inject $800 million in fresh capital into First Southern, a Florida bank.
Of late, private equity firms have been exploring opportunities in the regulated banking world by rushing to purchase failed banks but regulatory restrictions and public criticism kept them away. However, the sale of Florida-based BankUnited and California-based IndyMac Bancorp to a consortium of private equity and hedge fund investors backed by Federal Deposit Insurance Corporation (FDIC), has given private equity players an indication that the government was open to this kind of deals.
However, compared to BankUnited and California-based IndyMac Bancorp, First Southern has a relatively strong balance sheet with about $400 million in assets, making it a good vehicle for banking acquisitions in the future.
The First Southern deal, although requires regulatory approval, does not involve any government support. FDIC is preparing guidelines for private equity firms regarding their role while investing in failed banks.
(source- Banking Business Review)
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