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Blank-cheque companies have raised money to buy businesses ranging from pilotless helicopters to Donald Trump’s social media platform. A group of Wall Street veterans is now setting its sights on a new target: failed banks.
Porticoes Capital will seek to take over banks closed by the Federal Deposit Insurance Corporation, the US regulator, according to an official filing. The firm’s sponsors aim to attract hundreds of millions of dollars from investors.
The best-known blank-cheque groups are special purpose acquisition companies, which list on stock markets with a goal of taking another business public through a merger. Spacs exploded in popularity during the coronavirus pandemic but have faded as many of their targets proved to be disappointments, and in some instances frauds.
Porticoes is similar to a Spac in that is not an operating company and would need to complete an acquisition before opening for business. Unlike a Spac, the amount it actually raises from investors will depend on the size of the bank it eventually acquires.
The bet on failed banks suggests Porticoes’ sponsors see more trouble ahead for the sector a year after the failure of Silicon Valley Bank shook confidence in US regional lenders.
Leading the venture is Leslie Lieberman, an executive who got his start at former investment bank Drexel Burnham Lambert, worked on mergers and acquisitions at Kidder Peabody and bought banks in the wake of the 2008 financial crisis.
Joining Lieberman as a board member is Tom Naratil, formerly one of the highest-ranking US executives at Swiss bank UBS before he left in 2022. Also in the group is Manuel Sánchez Rodriguez, a former top executive at Spanish bank BBVA and a board member, since 2018, of the US government-backed mortgage insurance company Fannie Mae.
The FDIC takes over US lenders when they fail and brokers deals to sell what remains. The agency typically likes to sell to other regulated banks so the loans and customers of collapsed lenders remain under the eye of regulators. The result has been that private equity firms and other outside investment groups are largely locked out of the bidding.
Porticoes won approval late last year from the Office of the Comptroller of the Currency to buy banks closed by the FDIC. Its so-called shelf charter is a workaround to traditional curbs on private investors. Lieberman’s group was approved to run a bank holding company once Porticoes actually buys a bank.
Some lawyers and former regulators think others may follow suit.
“I’m an advocate for the shelf charter,” said Brian Brooks, a partner of DC law firm O’Melveny & Myers and a former acting comptroller of the currency. “In the failure of SVB, numerous potential bidders were excluded from the process, and as a result the cost to the FDIC deposit insurance fund might not have been minimised.”
Porticoes and its founders declined to comment on their plans.
Unlike a Spac, Porticoes is not looking to go public and instead plans to raise money in a private offering. While typical Spacs tell investors in advance what industries they are interested in but are not bound by those statements, Porticoes only has permission to buy a failed bank.
As a result, more banks would need to fail for Porticoes to be able to use money it has raised — and the list of potential targets is slim.
Despite the turmoil of early 2023, only five banks failed last year and all were resold within weeks.
Worries have persisted as banks disclose exposure to losses on commercial real estate loans as work from home leaves offices underused. Last year, a group of economics professors estimated that the drop in the value of office buildings, in the wake of the pandemic, could cause as many as 300 banks to fail over the next few years.
Last week, Fed chair Jay Powell told a Senate hearing that commercial real estate does pose a risk to a number of small and mid-sized banks. “There will be more failures,” Powell said.
