Greenberg Traurig's Galli

WASHINGTON, DC-Last week the Federal Deposit Insurance Corp. executed what has become a now routine transaction: that is, a partnership stake sale in which the investor or investors participate in the upside.

In this case, the bidders agreed to pay $445 million-- 59 cents on the dollar--for a 40% equity stake in a portfolio consisting of 1,660 commercial property loans held by 22 now-defunct banks that is valued at $1.85 billion. It was very similar to the handful of others that have closed and included a repeat participant, Colony Capital.

The other participant--junior partner Cogsville Group--was new to the program, which is not particularly noteworthy either, except for this: it was the first minority-owned firm taking a stake in these structured sale partnerships. Its participation represents a new push by FDIC to entice minority-owned business enterprises, or rather, small-sized investment groups, to take part in these sales by designing portfolios better suited to their capabilities. GlobeSt.com spoke with Thomas Galli, a shareholder at Greenberg Traurig LLP, who has been active in these transactions, to find out more details about FDIC's plans.

GlobeSt.com: Why was this deal significant?

Galli: What the FDIC did was create a structured transaction that was accessible to smaller to mid-sized investment firms, including those run by MBEs.

GlobeSt.com: Why is FDIC taking this step now? Is there something specific to the timing?

Galli: Not really, other than the market is finally getting comfortable with the transactions. In the beginning, investors were reluctant to participate and wanted to watch how the first deals were executed. Now that FDIC has done so many of them, the investment community has gotten comfortable with the terms and structures so more of them are looking at the program as an investment opportunity, including small firms and MBEs.

 GlobeSt.com: Is it difficult to put together a fund for small-sized investors?

Galli: I wouldn't say difficult, but it is an exercise in careful management of the volumes in these transactions. Theoretically, the FDIC could create structured transactions that are limited to a range of very small portfolios--say $200 to $300 million in loan amounts. But if it did that the volume would overwhelm FDIC's infrastructure. So what they are doing is balancing the volume by varying the size of these portfolios.

GlobeSt.com: Is that the only factor driving the size of these portfolios?

Galli: No, the factors that influence the size are in fact numerous--some of which we know, many of which we don't.

GlobeSt.com: How many more of  these deals can we expect to see?

Galli: There are two on the market right now, one is for $181 million and the other for $630 million. There are five, six more, approximately, that will come out in Q3. Two of these will be of the size that will attract the interest of SMB investment firms.

GlobeSt.com: How else can SMB firms participate?

Galli: They can partner with larger firms not only for the capital contribution but also to offer regional or product expertise. As we advise clients, we bring their attention to the opportunities to pair with smaller and medium sized firms, including MBEs, for sources of additional capital and regional and specific product expertise that may serve in the valuation and analysis of specific portfolios in structured transactions.