Flagstar Notice Regarding Additional MatlinPatterson Investment

TROY, Mich., Feb. 13 /PRNewswire-FirstCall/ -- As announced on January 30,
2009, Flagstar Bancorp, Inc. (NYSE: FBC) ("Flagstar") and MP Thrift
Investments L.P. ("MatlinPatterson"), an entity formed by MP (Thrift) Global
Partners III LLC, an affiliate of MatlinPatterson Global Advisers LLC, entered
into a closing agreement pursuant to which MatlinPatterson will purchase $100
million in equity capital from Flagstar, in addition to the $250 million in
equity capital purchased by MatlinPatterson on January 30, 2009.
Pursuant to the closing agreement, Flagstar will sell 50,000 shares of
convertible participating voting preferred stock to MatlinPatterson for an
aggregate purchase price of $50 million. The convertible participating voting
preferred stock has a liquidation preference of $1,000 per share and is
mandatorily convertible, subject to anti-dilution provisions, into 62,500,000
shares of our common stock, assuming a conversion price of $0.80 per share of
common stock. In addition, Flagstar will sell trust preferred securities to
MatlinPatterson with an aggregate liquidation preference of $50 million. The
trust preferred securities will be convertible into shares of our common stock
at the option of the holder on April 1, 2010 at a conversion price equal to
90% of the volume-weighted average price per share of our common stock during
the period from February 1, 2009 to April 1, 2010, subject to a per share
minimum of $0.80 and a maximum of $2.00. If MatlinPatterson does not convert
the trust preferred securities at that time, it will remain outstanding
perpetually unless redeemed by Flagstar at any time after January 30, 2011.
The transactions contemplated by the closing agreement would normally
require approval of shareholders according to the Shareholder Approval Policy
of the New York Stock Exchange ("NYSE"). As disclosed on December 31, 2008,
Flagstar had previously relied upon the use of this exception in connection
with the original $250 million equity investment, which has been extended to
apply to the additional $100 million closing agreement investment.
Additional Information
In connection with the proposed MatlinPatterson investment, a proxy
statement relating to certain of the matters discussed in this news release is
expected to be filed with the SEC. When filed, copies of the proxy statement
and other related documents may be obtained free of charge on the SEC website
( http://www.sec.gov ). FLAGSTAR'S SHAREHOLDERS ARE ADVISED TO READ THE PROXY
STATEMENT WHEN IT BECOMES AVAILABLE, BECAUSE IT WILL CONTAIN IMPORTANT
INFORMATION. Shareholders are encouraged to read the proxy statement when
filed, and Flagstar notes that the shareholder meeting on the matters
discussed in the proxy statement will occur after the closing of the
MatlinPatterson investment and the issuance of the voting preferred stock
which provides MatlinPatterson the ability to control the vote at any
shareholder meeting. Flagstar, its directors, executive officers and certain
members of management and employees may be considered "participants in the
solicitation" of proxies from Flagstar's shareholders in connection with
certain of the matters discussed in this news release. Information regarding
such persons and their interests in Flagstar is contained in Flagstar's proxy
statements and annual reports on Form 10-K filed with the SEC. Shareholders
and investors may obtain additional information regarding the interests of
Flagstar and its directors and executive officers in the matters discussed in
this news release, which may be different than those of Flagstar's
shareholders generally, by reading the proxy statement and other relevant
documents regarding the matters discussed in this news release, which are
expected to be filed with the SEC.
The information contained in this release is not intended as a
solicitation to buy Flagstar's stock and is provided for general information.
This release contains certain statements that may constitute "forward-looking
statements" within the meaning of federal securities laws. These forward-
looking statements include statements about the company's beliefs, plans,
objectives, goals, expectations, anticipations, estimates, and intentions,
that are subject to significant risks and uncertainties, and are subject to
change based upon various factors (some of which may be beyond Flagstar's
control). The words "may," "could," "should," "would," "believe," and similar
expressions are intended to identify forward-looking statements. The
potential investment by MatlinPatterson is subject to several conditions.
Accordingly, there can be no assurance that the transaction will be
consummated.
About Flagstar Bancorp, Inc.
Flagstar Bancorp, with $14.2 billion in total assets at December 31, 2008,
is the largest publicly held savings bank headquartered in the Midwest. At
December 31, 2008, Flagstar operated 175 banking centers in Michigan, Indiana
and Georgia and 104 home loan centers in 21 states. Flagstar Bank originates
loans nationwide and is one of the leading originators of residential mortgage
loans.
SOURCE Flagstar Bancorp, Inc.

Paul D. Borja, Executive Vice President - CFO, Flagstar Bancorp, Inc.,
+1-248-312-2000