Three months ago, a private equity firm approached Tom Galli, aWashington, DC- based attorney with Greenberg Traurig, with anintriguing proposition: it wanted to team up with a bank to acquirea non-performing real estate loan portfolio from a failedinstitution. The healthy bank would take the assets it wanted fromthe seized bank, the private equity fund would take thenon-performing real estate loan portfolio.

"We took the transaction to the one-yard line, at which pointthe parties elected not to proceed due to a failure to reachagreement on a couple of business terms ," Galli reports. One majorchallenge was that there was only a short window, two weeks atbest, to negotiate the documentation for this novel transaction. "Acritical element was coming up with a balanced agreement withinthat time constraint."

Since that experience, Galli says Greenberg Traurig "has madesignificant strides in developing just such a balanced agreement"to ensure that similar deals can be closed within the short timeframe allotted. The first private equity/bank deal will happeneventually, he predicts. And when it does, it will be the start ofwhat Galli sees as the next generation of loan portfolio purchasetransactions or structured sales involving the FDIC. In short, asdistress and excess leverage continue to break away from thetangled economy, private investors and the government will becomeever more creative in picking over-and capitalizing from-thepieces.