UPDATE 1-JC Flowers, others close to IndyMac deal -source
(Adds background on consortium)
NEW YORK, Dec 28 (Reuters) - A consortium of private equity and hedge fund firms, including J.C. Flowers & Co, is close to a deal to buy the assets of failed mortgage lender IndyMac, a source familiar with the matter said on Sunday.
The prospective buyers also include Dune Capital Management, a private investment firm run by former Goldman Sachs executives, and hedge fund Paulson & Co, the source said.
The consortium would buy the bank and its 33 branches, IndyMac's reverse-mortgage unit and a $176 billion loan-servicing portfolio, the source said.
The Federal Deposit Insurance Corp and IndyMac as well as the buyers in the consortium could not be immediately reached.
Last week IndyMac spokesman Evan Wagner said a deal was expected before the end of the year. The deadline for final bids for IndyMac's assets was Dec. 15.
The FDIC estimates IndyMac's failure cost the agency $8.9 billion. Barclays Capital and Deutsche Bank are advising the FDIC on the sale.
The mortgage specialist's IndyMac Bank unit was taken over by regulators after it failed on July 11 in one of the largest bank failures in U.S. history. At the time, it had $32 billion in assets and $19 billion in deposits.
IndyMac Bancorp Inc (IDMCQ.PK), the holding company, filed for Chapter 7 protection soon after with the U.S. bankruptcy Court in Los Angeles, indicating it plans to liquidate.
Founded in 1985 by Angelo Mozilo and David Loeb, who also founded Countrywide Financial Corp, IndyMac once specialized in "Alt-A" home loans, which often didn't require borrowers to fully document income or assets.
It collapsed after defaults mounted and as tight capital markets caused losses on mortgages it couldn't sell.
The seizure came after panicked customers withdrew more than $1.3 billion of deposits over 11 business days. The withdrawals followed comments in late June by U.S. Sen. Charles Schumer questioning IndyMac's survival.
BANK INVESTORS
The presence of private equity and hedge fund firms in the consortium for IndyMac comes as U.S. regulators have relaxed some rules in the past few months to encourage investments into the troubled financial sector.
In September, the U.S. Federal Reserve relaxed some rules regarding minority shareholder investments in banks, and last month the FDIC said it was expanding the pool of qualified bidders for troubled banks to include those institutions that do not currently have a bank charter.
J. Christopher Flowers, the founder of J.C. Flowers, was cleared in August by the Office of the Comptroller of the Currency to buy a small bank in Missouri. While expansion plans for the bank were not finalized, options included acquisitions of troubled or failed depository institutions.
New York-based Paulson & Co is run by John Paulson, a hedge fund manager who gained a superstar reputation with a big bet against the U.S. housing market that earned him more than $3 billion last year.
Dune Capital is by run by former Goldman executives Steven Mnuchin and Daniel Neidich. The firm was founded in 2004 after being spun off in a restructuring of investor and philanthropist George Soros' hedge fund business.
Soros had hired Mnuchin in 2003 to run SFM Capital Management to focus on making loans and buying up risky bonds. (Editing by Gunna Dickson and Lincoln Feast) (For more M&A news and our DealZone blog, go to www.reuters.com/deals)
