First City Bancorporation of Texas announced Thursday that it had obtained preliminary bids "in excess" of the $210 million it expected for the 13 south Texas banks it has put on the block.
The ailing company also announced that it had reached agreements in principle to renegotiate leases for "substantial reductions" in rental costs.
Community-bank Bidders?
Houston-based First City did not identify the bidders for the banks, which have a total of 25 branches and control $2.5 billion in assets. Several bidders are understood to be community banks.
The bank sales, combined with the projected savings on rental costs, are major components of a recapitalization designed to prevent the company from being seized by regulators.
The proceeds, along with a $100 million capital infusion. would be pumped into the seven larger and more troubled banks the company hopes to keep. The seven banks would have 62 branches controlling $6 billion in assets.
But First City must overcome several obstacles before it can proceed.
For starters, it is not yet clear that federal regulators will permit First City to sell banks that are still modestly profitable. And the banking company has not yet landed definitive sales agreements.
OCC Deliberating
Robert W. Brown, First City's chief financial officer, said the company is in regular contact with regulators but said he had "no idea" when they would decide whether First City could proceed.
Leonora Cross, a spokeswoman for the Office of the Comptroller of the Currency, said the agency "is still reviewing" the plan. She declined to comment further.
First City lost $92.3 million during the first half of 1992 and had exhausted its common equity at midyear. Third-quarter results have not been released.
The tricky part for regulators, experts said, is deciding whether they think the plan will work.
Regulatory Considerations
When the outlook for a private reorganization is bleak, regulators often block the sale of valuable assets, believing the assets later would facilitate sale of the entire operation if it failed, said Richard Kneipper, a lawyer in the Dallas offices of Jones, Day, Reavis & Pogue.
If regulators feel confident that spinning off assets can help revitalize a bank, on the other hand, "they are only too happy to approve," said Tommy Brooks, former general counsel of the Federal Deposit Insurance Corp.
First City also announced Thursday that it had moved its annual meeting date to Dec. 11, from Dec. 8, and it said proxy materials would be released in November.
Shares of First City rose 6.2 cents, to 93.75 cents, in late afternoon trading.
