EL CAJON, Calif.-Following the failure of United Resources' bid to raise capital and emerge from Wescorp's shadow, some credit unions are prepared and ready to move on to "Plan B," while others-mostly small CUs-are concerned and wondering what's next.
Western Bridge Corporate FCU, trying to re-charter as United Resources FCU, fell $118 million short of its capital-raising goal. Meanwhile, NCUA-which oversees the corporate as conservator-said it plans to solicit acquirers to obtain the business. United Resources' capital call period ended having raised approximately $82 million, far less than the $200 million sought.
Bob Heim, CEO of the $11-million Inland FCU, acknowledged that the news of recapitalization failure came as a surprise. "I was startled. There are some real concerns on the part of the small credit unions in the west, because we can't easily move to the Fed. The expense is horrendous."
Heim admitted he thought United Resources capital call would be successful. "I had fully expected that to happen and I am very disappointed in my big brothers," added Heim. "My guess is that the great majority of credit unions that said yes to capitalization are under $50 million in assets."
Heim said IFCU had reviewed other corporates earlier in the year and viewed United Resources as the best option. That gives Heim a head start on his plans to find another resource now. "There are other corporates interested in our business, but I want to look at what NCUA is putting together. It would make good sense to not reinvent the wheel and not have to change networks and all that business process. Another corporate purchasing Western Bridge makes the most sense, and would likely be the easiest for us."
View From Billion-Dollar CU
At the other end of the asset spectrum, the $3.7-billion Patelco Credit Union threw in its capital support near the recap deadline and CEO Ken Burns admitted disappointment in the outcome. Noting it relies on Western Bridge to handle a significant number of transactions, Burns is hopeful NCUA will merge Western Bridge in whole.
"Last year we had 1.6-million transactions just for non-Patelco members via the shared branch network," said Burns. "Under the new (United Resources) business model we estimated we'd save $50,000 per year for the first two years. So it was financially viable for us to support the new corporate and we have long ties with WesCorp."
The Pleasanton, Calif.-based CU has a backup plan, and one option is to go directly to the Fed, said Burns. But the CEO is concerned for small credit unions aligned with Western Bridge who can't transfer item processing as easily to the Fed as their larger counterparts. "Also, small credit unions that shop for another corporate will find it difficult to choose one that provides the same level of service and pricing as Western Bridge," offered Burns. "The real burden will be on the small credit union."
The $380-million Vons CU in El Monte, Calif., upped its capital commitment on the final day of United Resources' capitalization period, going from $960,470 to $1.5 million. However, all along CEO Stephen Weakley knew the bid for a new Wescorp was an uphill battle. "It was difficult for CEOs to go to their boards and ask for more money for a corporate that had already lost so much of their money and is costing them more through assessments. That was a tough sell."
Vons' backup plan now may lean toward working directly with the Fed. "But nothing is set," said Weakley. "We know NCUA will be very responsive and responsible about this and give everyone enough time to do a transition. We will wait to see what they put together first."
Corporate One FCU told Credit Union Journal that a number of CUs are putting in place their backup plans now, reaching out to the Columbus, Ohio-based corporate. In the last two weeks Corporate One has picked up more than 10 new members from the western U.S. "We have been considered by a lot of folks' plan B for a while," said CEO Lee Butke. "That is fine with us. They were hoping United Resources would succeed. Now we are seeing those plans activated."
John Fiore, chairman of the board for Alloya Corporate FCU, the newly chartered remnant of Members United Corporate FCU, said Alloya has also become an alternative for western CUs and is getting numerous calls after the Western Bridge recapitalization bid failed. "Hopefully NCUA gives credit unions the opportunity to make their own choices. Our private placement is still open through the end of October."
Fiore, also CEO of the $760-million Motorola Employees CU in Schaumberg, Ill., added that Alloya would be interested in acquiring the Western Bridge business once Alloya is operating in late October.
No Drop-Dead Date
NCUA Spokesperson David Small, told Credit Union Journal there is no "drop-dead date" for Western Bridge. "While we will not prolong the life of the bridge, we must ensure that payments services are continued for a reasonable period of time so as not to cause undue harm to natural-person CUs. The plan, as we have outlined, is to get bids on a package deal. We are looking for the least, long-term cost solution so we will not limit the bids to just other corporates. But it is probably a safe assumption that it will end up being (another corporate)."
Inland's Heim said he hopes NCUA will get back soon with a timeline. And while he likes the idea of moving Western Bridge in whole to another corporate, he is concerned the acquirer will be overburdened, meaning reduced service to small CUs.
