BankUnited, First Wind Line Up For IPOs

Sponsors are bringing a pair of controversial IPOs to market, controversial because even though the stock market appears to be becoming more receptive to the companies, the markets where they operate may not be.

BankUnited, owned by some of the world’s most powerful private equity firms, was expected to file for an initial public offering, looking to raise roughly $500 million, two sources familiar with the matter told Reuters, publisher of Buyouts. BankUnited plans to use the proceeds from that offering and a secondary offering to buy other banks, one of the sources said.

Private equity firms, including Wilbur Ross’s WL Ross & Co, The Carlyle Group, Blackstone Group and Centerbridge Partners, bought the assets of failed BankUnited FSB in May last year from the Federal Deposit Insurance Corp. The firms put $900 million in the bank and installed former North Fork Bank head John Kanas as CEO. The deal, attractive for loss protections from the FDIC, led to a surge of other private investors looking to enter the U.S. banking sector. But it was also followed by tighter regulations, humbling investors’ aspirations.

The planned offering would make BankUnited the first major U.S. bank bought by private investors during the recent financial crisis to go public. The industry continues to struggle in the aftermath of a two-year financial crisis.

BankUnited’s existing shareholders plan to sell a small percentage of their holdings, the source said. The idea is to “raise a little bit of new capital and then the existing shareholders will sell enough to create a decent sized float in the stock,” the source said.

BankUnited, based in Miami Lakes, Florida, sees the U.S. Southeast as its primary market but also plans to eventually branch into New York, the source said. The bank has about $11 billion in assets and more than 75 branches.

Morgan Stanley, Bank of America Corp., Deutsche Bank and Goldman Sachs are underwriting the offering, the source said.

BankUnited declined to comment. The sources are anonymous because the plans are not yet public. Another source previously told Reuters that an IPO would come at the end of 2010 or in the first quarter of 2011, at the earliest.

In the other IPO, the wind farm owner and operator First Wind Holdings Inc. was planning a $300 million float, which may be a risky bet in the current energy climate.

First Wind finances, develops and operates utility-scale wind energy projects in the Northeastern and Western United States and Hawaii. Seven projects now operating had the capacity to generate 504 megawatts of electricity as of September 30. It expects to have capacity for another 268 megawatts in operation or under construction by year-end.

The Boston-based company, mostly owned by buyout firm Madison Dearborn and hedge fund operator D.E. Shaw, USA!! foresees rapid growth. By 2014, First Wind plans to have 1,900 megawatts in operation or under construction. One megawatt produces enough power to meet the electricity needs of 800 typical American homes.

But wind energy is expensive and financing is complicated. As of September 30, First Wind had accumulated losses of $233 million and outstanding debt of $582.2 million. It does not have enough cash or liquid short-term investments to pay the debt and acknowledged in a filing that default was a risk.

Some U.S. government financing may also be suspended at the end of the year and market prices for electricity may be too low to spur growth. First Wind has never been profitable.

“It’s all about a bet on an uncertain future. Who knows if this company will actually be able to build the infrastructure that it promises?” said Josef Schuster, founder of Chicago-based IPO research firm IPOX Schuster LLC.

“It deserves attention but I don’t see it as a big winner,” he said.

New U.S. wind installations were down 71 percent through the first six months of 2010, according to the American Wind Energy Association.

First Wind has received hundreds of millions of dollars in U.S. government support. It received a $117 million Department of Energy loan guarantee in July and has netted $254 million worth of grants from the U.S. Treasury since September 2009.

But some U.S. government subsidies could end. Cash grants to cover a portion of the costs of project construction, paid out under the Obama administration’s stimulus bill, will only apply to projects that break ground by the end of 2010.

Private financing for wind projects often comes in the form of power purchase agreements, or PPAs, which last between five and 20 years and whose value is calculated based in part on electricity prices.

Clare Baldwin is a Reuters correspondent in New York. Paritosh Bansal and Scott Malone also contributed to this story.