Enterprising Investor
10年前
Albina Community in Oregon Files for Bankruptcy (9/18/14)
by Chris Cumming
Albina Community Bancorp in Portland, Ore., has filed for bankruptcy.
The company applied for Chapter 7 liquidation on Wednesday, the last day before it would have defaulted on its trust-preferred debt. Albina had been deferring interest payments for five years, and Hildene Capital Management, a New York hedge fund, had threatened to force the company into involuntary liquidation if it defaulted on the payments. Hildene invested in a collateralized debt obligation backed by Albina's debt.
Albina's Chapter 7 filing showed $7.5 million on liabilities, all unsecured debt, and $1.3 million in assets. The company's largest remaining asset is its 9.9% stake in the $137 million-asset Albina Community Bank. The company has been operating under a written agreement with the Federal Reserve Board that forbids it from paying its trust-preferred debt without regulatory approval.
The company's board resigned as of the bankruptcy filing. Graham Bryce, the company's former chairman and chief executive, declined to comment, as did John Scannell, Hildene's chief operating officer.
Bankruptcy has become a common strategy for debt-burdened holding companies, but Albina Community Bancorp is an unusual case. The company's stake in Albina Community Bank was diluted in a recapitalization last year. The recap was structured as a direct sale of stock by the bank, circumventing the over-indebted parent company.
The recapitalization gave Beneficial State Bancorp in Oakland a 90.1% stake in Albina Community Bank. Beneficial is controlled by a nonprofit founded by the billionaire Tom Steyer, founder of the hedge fund Farallon Capital Management, and his wife, Kathryn Ann Taylor. The couple has donated nearly $50 billion to back Beneficial, a community development financial institution, since the financial crisis. Taylor did not immediately respond to a request for comment.
Albina's trust-preferred investors opposed the recapitalization, arguing that it violated the trust-preferred agreement. In comment letters on the stock sale, Hildene and Zions Bancorp, another investor, raised the possibility that the sale could expose Albina's directors, as well as Beneficial, to legal liability. But the Federal Reserve Board of San Francisco approved the sale, saying the creditors' objections are outside its jurisdiction.
There are about 240 banks that have defaulted on their trust-preferred debt and 200 that are still deferring interest payments, according to Fitch Ratings analyst Alina Pak. Two have been forced by creditors into involuntary bankruptcy: American Bancorporation in Minnesota and FMB Bancshares in Georgia.
http://www.americanbanker.com/issues/179_181/albina-community-in-oregon-files-for-bankruptcy-1070106-1.html?utm_campaign=daily%20briefing-sep%2019%202014&utm_medium=email&utm_source=newsletter&ET=americanbanker%3Ae3085704%3A4332755a%3A&st=email
Enterprising Investor
10年前
Oregon Standoff Shows Difficulties Escaping Trust-Preferred Trap (9/15/14)
By Chris Cumming
Albina Community Bancorp nearly managed to wriggle out of a trust-preferred vise, but it could still find itself getting squeezed.
Hildene Capital Management, a New York distressed-debt hedge fund, has threatened the Portland, Ore., company with involuntary bankruptcy — or other legal consequences — if it defaults on its trust-preferred debt. Albina has been deferring interest on its trust-preferreds for five years and will default on about $6 million in debt and accrued interest on Sept. 17 if it doesn't pay.
"We certainly intend to enforce the obligation," said John Scannell, Hildene's chief operating officer. "It's hard, but we'll find a way to do it."
Threats of involuntary bankruptcy are nothing new for debt-burdened community banks, and they are likely to become more common after a judge ruled in creditors' favor last month in the case of FMB Bancshares in Georgia.
What's unusual about Albina's situation is that the company has already sold a majority interest in its bank unit. Last year, Albina sold a 90% stake in its bank to Beneficial State Bancorp in Oakland, Calif., by issuing new stock at the bank level, thus bypassing the debt-burdened holding company.
The unusual recapitalization saved the bank, but it could expose the parent company to further legal challenges. The sale was bitterly opposed by Hildene and other creditors, including Zions Bancorp and a unit of Assured Guaranty, which claimed the deal violated their rights. Asked if the fund could pursue further legal challenges related to the Beneficial sale, Scannell said, "We'll see."
The deal was necessary to save the $137 million-asset bank, which had suffered heavy losses and was on the brink of failure, said Graham Bryce, Albina Community Bancorp's chairman and chief executive.
"I guess [the Beneficial deal] was unusual, but we didn't spend a lot of time asking what everybody else did," Bryce said. "We said, 'What are our alternatives?'"
Bryce declined to discuss the dispute with Hildene. Scannell said Hildene has reached out to Albina about repaying the trust-preferred debt, but those discussions have been "unproductive."
Trust-preferred debt lets issuers defer interest payments for five years, after which point creditors can demand full repayment. About 240 community banks have reached the end of the five-year deferral period for trust-preferred debt, and another 200 are nearing the end. Many of them, like Albina, are under regulatory orders barring them from paying trust-preferred creditors.
Caught between creditors demanding payment and regulators forbidding it, many community banks have found themselves left with no option but bankruptcy. In these cases, the bank is sold at auction to pay the holding company's debts.
Albina is one of few companies in this position that managed a recapitalization without bankruptcy. Its recap left Albina Community Bancorp with just 9.9% ownership in the bank; Beneficial has a 90.1% stake. The transaction gave the bank nearly $9 million in capital, but it did not solve the holding company's trust-preferred problem.
Albina has the support of deep-pocketed backers. Beneficial, like Albina, is a community development financial institution, owned by a nonprofit foundation created by hedge fund billionaire Tom Steyer, who founded Farallon Capital, and his wife, Kathryn Ann Taylor. They have contributed nearly $50 million to support Beneficial since the financial crisis.
Yet Albina's creditors have expressed concern over the quality of Beneficial's management and the bank's reliance on capital from Steyer and Taylor. The $364 million-asset Beneficial, formerly One PacificCoast Bank, has lost money in all but two years since its 2007 founding, though it made $1.2 million during the first half of this year.
The recapitalization was approved in September by the Federal Reserve Board of San Francisco, despite loud complaints from Hildene and other investors in collateralized-debt obligations backed by Albina's trust-preferred securities.
The recapitalization has not been challenged in court, but Scannell left that possibility open, calling the sale to Beneficial a "back-room deal." In comment letters to the San Francisco Fed last year opposing the sale, the fund said the deal violates the trust-preferred indenture.
The deal also raises the possibility of legal claims for breach of fiduciary duty by Albina's directors, as well as interference in contracts by Beneficial, Hildene and Zions wrote in a letter objecting to the transaction.
"Creditors of Albina Bancorp may be forced to litigate these issues, at great expense to Albina Bancorp, its management" and possibly Beneficial, Hildene and Zions wrote.
The San Francisco Fed, in approving the deal, said it lacked the authority to adjudicate the dispute with the creditors, and that the investors should look to the courts to resolve the issue. The San Francisco Fed declined to comment on the dispute or the recapitalization.
Whether Hildene or other investors can form a legitimate legal objection to the sale, nearly a year after it closed, depends on the language in Albina's trust-preferred documents, which are not public.
http://www.americanbanker.com/issues/179_178/oregon-standoff-shows-difficulties-escaping-trust-preferred-trap-1069937-1.html?zkPrintable=1&nopagination=1
56Chevy
11年前
UNBELIEVABLE!
ACBC sent out a shareholder letter yesterday which Joeysco forward on to me last night. It said;
As a shareholder of the company, you know that our wholly owned subsidiary, Albina Community Bank, has been operating under a "Consent Agreement" executed between the bank and the FDIC in March 2011. The Consent Agreement required, among other hings, that the bank raise sufficient capital to increase it's capital ratios to acceptable levels within 120 days of entry into the Consent Agreement or face having the FDIC ate over ownership and control of the bank.
Over the last 2 years, the bank, with he Company's support, met with a long list of potential and interested investors and considered all alternatives for raising capital at he holding company level, including a sale of Bancorp and/or bank. As a result of, among other things, the significant Trust Preferred debt of Bancorp, we were unable to secure an investor at the holding company level.
On October 11, 2013, the bank sucessfully completed the sale of new commn equity in the amount of $8.75 million to One PacifcCoast Bancorp, Inc. of San Francisco, CA. The investment resulted in the Foundation acquiring 90.1% of the total outstanding equity of the bank and the dilution of Bancorp's ownership interest in the bank to 9.9%. In the end, the Bank has an appraisal of the value of this issuance and received a "Fairness Opinion" to assist the existing shareholders in their understanding of why this transaction was fair and in their best interests.
This transaction preserved the continued viability of the bank, but it did not provide any new cash to the Bancorp. We continue to have approximately $6 million of outstanding Trust Preferred debt that does not mature until late 2014 and on a consolidated basis have had a negative net worth of approximately $2.2 million. In addition, we have preferred stock that would need to be redeemed before the common shareholders would realize anything in a liquidation event, so we are not optimistic that the preferred or common shareholders will receive a cash return in the event we are able to sell our remaining 9.9% interest in the bank.
This proxy statement includes the notice of an Annual Meeting of Shareholders, at which meeting we will, among other things, seek your approval to reduce the size of the Bancorp Board to reflect the reduced level of work for the board under this new capital base. We are saddened by this outcome but are thrilled that we were able to assure the survival of Albina Bank as it will now be a bigger and stronger community bank serving the needs of this great area.
What does this mean? It means OnePacificCoast didn't buy 90.1% of Albina Community Bancorp [ACBC]..they bought 90.1% of Albina Bank. Period! Owning stock in a bank is not the same thing as owning stock in its holding company. OnePacificCoast doesn't own one share of ACBC the Holding company...and what they're telling shareholders in this last shareholder letter is Albina Bank Holding Company is for all practical purposes bankrupt. I don't know how else to say it.
1 12 U.S.C. § 1842.
2 OnePac Bancorp would directly acquire newly issued shares of Albina Bank, representing 90.1 percent of the latter’s common stock. Under the proposal, Albina Bank’s current parent, Albina Community Bancorp (“Albina Bancorp”), Portland, would retain 9.9 percent of the common stock of Albina Bank.
http://www.federalreserve.gov/newsevents/press/orders/orders20130926a1.pdf
*I'm stunned. I knew there were large pieces to the ACBC / OPCB puzzle missing and that always bugged the crap out of me because something just didn't add up BUT I never suspected this is what they were doing. In my mind this is clear cut case of fraudulent conveyance...but it was all done with the blessings of the regulators...so how could it be?? I don't know what to say..I'm sorry for getting this wrong if I did. This was a very smart but tricky way to go about acquiring an asset without the debt....too bad they didn't spell this out from day 1 in terms the average shareholder would understand.
I'd like to hear from others on this.
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