IndyMac Bancorp files Chapter 7 bankruptcy

By Caroline Salls

Pittsburgh, Aug. 1 - IndyMac Bancorp, Inc. made a Chapter 7 bankruptcy filing Thursday in the U.S. Bankruptcy Court for the Central District of California, according to an 8-K filed with the Securities and Exchange Commission.

The company said it expects the court to appoint a bankruptcy trustee soon.

According to the bankruptcy petition, IndyMac has between $50 million and $100 million in assets and between $100 million and $500 million in debt.

As previously reported, Indymac Bank was shut by the Office of Thrift Supervision on July 11 after $1.3 billion was withdrawn from accounts in a "deposit run" in the wake of a letter from Sen. Charles Schumer, D-N.Y., that expressed concerns about the institution's viability.

IndyMac's operations were transferred to the Federal Deposit Insurance Corp., which is running a successor institution, IndyMac Federal Bank, FSB.

The OTS said it acted after determining that IndyMac Bank was unlikely to be able to meet continued depositors' demands in the normal course of business and was therefore in an unsafe and unsound condition.

Pasadena, Calif.-based IndyMac had been in trouble for some time - the OTS described its financial situation as "precarious" - but the regulator blamed Schumer's letter for making its problems worse.

"This institution failed today due to a liquidity crisis," OTS director John Reich said in a July 11 news release. "Although this institution was already in distress, I am troubled by any interference in the regulatory process."

The OTS said IndyMac had suffered from the unprecedented stress in the residential real estate market, combined with the evaporation of the non-agency secondary mortgage market in August 2007.

The OTS added that it had significant concerns with the bank's funding strategy, had directed appropriate changes and was finalizing a new set of enforcement actions to address its numerous problems.

As a result of an OTS examination that began in January 2008, the OTS deemed IndyMac to be in troubled condition. An overwhelming majority of problem institutions are able to successfully modify their operations and business plans, work closely with their regulator and eventually return to a healthy condition, according to the OTS.

IndyMac had reacted to market conditions and OTS concerns in November 2007 by changing its operations and business plan to build a foundation for recovery. IndyMac was actively seeking to arrange a significant capital infusion or find a buyer, the OTS said.

The OTS named the FDIC as conservator of the newly chartered successor institution and will transfer most of the assets and liabilities of IndyMac to the new thrift.

IndyMac's Chapter 7 case number is 08-21752.

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