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New York Community Bank plans to raise more than $1 billion in a deal led by former Treasury Secretary Steven Mnuchin's investment firm to shore up its finances and ease fears after weeks of turmoil surrounding the bank. is.
The regional financial institution also named Joseph Otting, a former Comptroller of the Currency under President Donald Trump, as its new chief executive officer. Otting replaces Alessandro Dinero, who took over as CEO of the bank less than a week ago and will return to his previous role as non-executive chairman. Mr. Mnuchin will also join the board of directors.
Secretary Mnuchin said, “We have more than $1 billion of capital invested in our bank, and we are committed to increasing our reserves in the future should we need to increase our reserves to match or exceed NYCB's large bank coverage ratios.'' We are confident that we currently have sufficient capital.”
NYCB stock had plunged more than 40% early Wednesday, but trading was halted at $1.86 in an announcement following reports of a possible stock sale. The stock rebounded on news of the acquisition, nearly doubling from its lows, but is still down about two-thirds since the end of January. Shares rose more than 7% to close at $3.46.
The recent decline in NYCB stock has not been reflected in the broader local banking sector. The KBW Regional Bank Index, which includes NYCB, closed just 0.4% lower on Wednesday.
According to a press release, the investor group will purchase NYCB common stock at a price of $2.00 per share and convertible preferred stock at the same conversion price. The company will also receive warrants to purchase additional non-voting stock at a price of $2.50 per share.
Mnuchin's firm, Liberty Strategic Capital, also includes other investors including Hudson Bay Capital, Reverence Capital Partners and hedge fund Citadel. The group warned that the total investment of $1.05 billion is subject to “completion of final documentation and receipt of applicable regulatory approvals.”
Mnuchin founded Liberty in 2021 after leaving the Trump administration. The company has raised more than $2.5 billion and closed several smaller deals, including acquiring movie studio Lions Gate Entertainment and minority stakes in four cybersecurity companies. Liberty's backers include SoftBank and Saudi Arabia's sovereign wealth fund.
Reverence Capital, founded by three former Goldman Sachs executives, is led by Milton Berlinsky, who founded the investment bank's financial institutions group and has targeted mid-market financial services transactions.
Dinero said the involvement of Mnuchin, Otting and Berlinski “positively supports the ongoing rebuild and allows us to execute our strategy from a vantage point.” .
In 2009, Mr. Mnuchin led a group of private equity investors that bought IndyMac, a mortgage lender that collapsed during the 2008 financial crisis, from the Federal Deposit Insurance Corporation. Following the completion of the transaction, Mr. Otting was appointed chief executive officer of the bank, which was renamed OneWest and later sold to CIT.
NYCB stock has been under pressure since late January, when the bank reported unexpected losses of hundreds of millions of dollars. Moody's downgraded the company's credit rating to junk status over the weekend, days after the company said it had replaced its chief executive officer and identified “material weaknesses” in internal controls that guide loan reviews. revealed.
NYCB is working with Jefferies as financial advisor. Its legal advisors are a team led by Skadden Alps partner Sven Mikisch, who was recently hired by Simpson Thatcher.
