A bankruptcy judge allowed AmericanWest Bancorporation to move forward with plans to hold an auction for its bank, despite an objection from a hedge fund attempting to impede the deal.
Judge Patricia C. Williams of the U.S. Bankruptcy Court in Spokane, Wash., on Wednesday cleared the bank-holding company to auction off its AmericanWest Bank with SKBHC Holdings LLC — an entity backed in part by Goldman Sachs Group Inc. and Oaktree Capital Management LP funds — serving as the lead bidder.
SKBHC has agreed to pay $6.5 million for the bank and to pump in $200 million in additional capital once the deal is complete. A sale hearing is scheduled for Dec. 9.
Approval to hold the auction within six weeks of the holding company's Oct. 28 bankruptcy filing came over protests from hedge fund Hildene Capital Management LLC. Hildene said the fast-moving sale will discourage others from participating in the auction and potentially driving up the price paid for the bank.
The hedge fund said a higher price could increase recoveries for Hildene and similar investors who sit on the other end of a complicated financing arrangement from AmericanWest Bancorporation.
Hildene said it doesn't protest to a public auction but said rival bidders should be given more time to come forward and their bids should face fewer restrictions. The proposed sale process "is so expedited and so riddled with gimmicks" that other stakeholders in the case "have no meaningful opportunity to participate in the auction," Hildene said in court papers.
The fund balked at AmericanWest Bancorporation's assertion that its bank must be sold quickly or risk being seized by regulators. Hildene points out that the bank continues to operate independently despite having received orders from the Federal Deposit Insurance Corp. to recapitalize more than six months ago.
Hildene also took issue with a $1 million fee that would be paid to SKBHC if it failed to acquire the bank. The fund said such a fee, on top of a minimum overbid of $500,000, will keep potential auction participants on the sidelines.
Williams approved both the "break-up fee" and the over-minimum overbid in her auction order.
AmericanWest Bancorporation challenged Hildene's protests by saying the hedge fund is not a creditor of the holding company and therefore has no standing to participate in the bankruptcy case.
Hildene says it holds $67.5 million of securities issued by three Cayman Islands companies that provided financing to AmericanWest Bancorporation through an intermediary.
The holding company has previously said a requirement to repay more than $40 million in debt connected to that financing limited its ability to find a buyer or investor outside of bankruptcy.
SKBHC or the eventual buyer of AmericanWest Bank will purchase the 58-branch bank out of Chapter 11 free and clear of those obligations.
AmericanWest Bancorporation, of Spokane, filed for Chapter 11 protection in order to sell its bank to SKBHC, pending better offers at auction.
SKBHC is a recently formed bank-holding company seeking to acquire distressed banking institutions primarily in the Pacific Northwest, West Coast and the Southwest. The entity has $750 million to spend on such acquisitions. SKBHC investors include Goldman's GS Capital Partners fund, an Oaktree fund and the Teachers' Retirement System of the State of Illinois.