Steven Mnuchin spearheads a $1 billion effort to rescue NYCB

Steven Mnuch

In a bid to regain investor trust, New York Community Bank (NYCB) announced a new CEO and secured a $1 billion investment, with former Treasury Secretary Steven Mnuchin among the contributors. These actions were taken on Wednesday following a sharp decline in NYCB’s stock, which dropped by as much as 45% following reports of the bank seeking investors to purchase its stock. Following the announcement of the $1 billion deal, the stock rebounded by up to 18%, ultimately closing the day with a gain of over 7%. Notable firms participating in the infusion include Liberty Strategic Capital, founded by Mnuchin in 2021, along with Hudson Bay Capital, Reverence Capital Partners, and Citadel Global Equities.

They, along with certain bank executives, will acquire common and convertible preferred stock, effectively gaining control of the Hicksville, N.Y.-based company.

This agreement also entails a change in leadership. Joseph Otting, former Comptroller of the Currency, is set to assume the role of NYCB’s new CEO, marking the third individual to hold this position in recent weeks.

The transaction is slated to be finalized by March 11, pending regulatory approvals.

“In considering this investment, we carefully assessed the bank’s credit risk profile,” stated Mnuchin in a press release. His firm is expected to contribute $450 million, exceeding the investments of other participants.

“With over $1 billion in capital injected into the bank, we are confident that we now possess adequate capital reserves, should there be a need to increase them in the future, aligning with or surpassing NYCB’s coverage ratio compared to its larger bank counterparts.”

Mnuchin, who previously served as Treasury Secretary under President Donald Trump and was formerly a partner at Goldman Sachs, has prior experience dealing with another troubled bank.

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