WASHINGTON -- Another troubled California thrift has nosed under the regulatory wire with a private recapitalization, showing that the strong market for equities of problem thrifts is holding.
UnionFed Financial Corp., parent of $1 billion-asset Union Federal Bank, said Friday that its offering of $45 million in common stock was oversubscribed.
"We saved the taxpayers a lot of money." said David S. Engelman, chairman of the board, president, and chief executive officer of the Brea, Calif.-based holding company and thrift.
Capital Ratios Slipped
At the end of March, Union Federal had 2.13% core and 4.28% risk-based capital ratios. By June 30, these ratios had slipped further, to 1.4% core and 3.1% risk-based. putting the thrift in the OTS' critically undercapitalized category and leaving it at risk of immediate takeover.
The OTS gave Union Federal until the end of this month to become adequately capitalized, however, with at least 4% core and 8% risk-based capital. After the deal closes next week, Union Federal will have more than 5% core capital and just under 9% risk-based capital.
Union Federal's deal was unusually complicated. It started as a standard rights offering to existing shareholders but evolved into a four-part deal combining a rights offering and private placement.
Many rights offerings arc done with standby investors, who agree to buy any shares existing stockholders do not.
Because recent rights offerings for thrifts have been oversubscribed, Mr. Engelman said, outside investors interested in Union Federal wanted to ensure there would be stock for them to buy.
As a result, Union Federal's investment bank. New York-based Keefe, Bruyette & Woods Inc. arranged part of the deal as a $24.1 million offering to high-net-worth individuals and institutional investors, Of the $24.1 million, investors got two-thirds in shares and the rest in warrants allowing them to buy shares for $2.33 apiece anytime within five years.
The offering was priced at $1.75 a share.
The second component was an additional $5.56 million private placement to a similar investor group. That portion did not involve warrants.
The third part was a $1 million offering to directors, officers, and other employees, and the fourth was a $14.34 million rights offering to existing shareholders.
