BankAtlantic Tries Rights Offering Again, One Year On

Forget the pile of nonperforming assets, eight consecutive quarterly losses and the cancellation of a similar rights offering a year ago; BankAtlantic Bancorp Inc. is again asking shareholders to double down.

The Fort Lauderdale, Fla., company announced plans Monday to raise up to $100 million through a rights offering. Such transactions, in which a company gives existing shareholders the opportunity to buy more shares, are common among small, privately held banks. They have been rare among listed ones lately, as investors who lost money on bank stocks during the crisis were loath to buy more.

Since last year at least three proposed rights offerings from financial institutions — including a smaller one from the $5.3 billion-asset BankAtlantic — have been scrapped. But observers said the recent upturn in bank stocks may make rights offerings an easier sell.

And when stock is to be sold at a discount to the market price — as BankAtlantic said it expected to do in the new offering — rights offerings can help soothe shareholder fears about dilution.

"If you're going to do something in a tough market and you're worried about your existing stockholders being concerned, then at least if you give them the right to participate, then they can't complain," said Kip Weissman, a partner at Luse Gorman Pomerenk & Schick PC.

"If they think it's a very low price, then maybe they should write a check."

BankAtlantic said it had not determined the price or number of shares to be issued. On Monday the company's shares closed down 12% at $5.83, resulting in a $66 million market capitalization. Last week BankAtlantic's shares increased 27%.

The company did not return calls for this story.

Alan B. Levan, BankAtlantic's chairman and chief executive officer, said in a press release that "offering our stock directly to our existing shareholders will give every shareholder the opportunity to participate and acquire shares on the same terms."

An April Securities and Exchange Commission filing listed Levan as the beneficial owner of 25.3% of BankAtlantic's class A shares and 100% of its class B shares.

Such interlocking ties may give BankAtlantic an extra impetus to give other owners first dibs on new shares.

"Anytime you do a transaction with a control person, there's a fiduciary duty," Weissman said. "But if you offer the same opportunity to all your stockholders, then you eliminate that."

Wes Brown, a managing director for St. Charles Capital in Denver, agreed that a "real important" motivation for such offerings is that "when times are tough and you are going to have to do the financing at a very low, unattractive pricing, you diminish the liability of the director by allowing existing shareholders to participate in that low price deal."

In the first quarter of last year, the $2.8 billion-asset Security Bank Corp. in Macon, Ga., proposed a $35 million rights offering that never closed, according to SNL Financial LC data. (Security's six bank subsidiaries failed July 24.)

Guaranty Financial Group Inc. in Austin offered its shareholders $150 million, but also never closed the offering. Guaranty warned last month that it may fail.

BankAtlantic announced a $55 million rights offering about a year ago and then pulled the plug on it two weeks later without giving a reason.

Matt Olney, an analyst with Stephens Inc., said that the chances may be better this time around for BankAtlantic to raise capital from its owners.

"I think they are hoping we have seen the worst of the housing and the economy and investors would be more likely to invest," Olney said. "A year ago, we didn't know how bad it was going to be. It feels like we have a better grasp today."

Lee Bradley, the president of Southeast Financial Holdings Inc., which specializes in secondary offerings for banks, agreed. "Generally we are starting to see investors start to come back to bank investing," he said. "I think you are going to see more rights offerings coming out, because investors are willing to come back and reinvest."

BankAtlantic has not been profitable since the second quarter of 2007, showing a loss of almost $300 million since then, largely as a result of problems in the residential real estate portfolio.

During that time, tangible stockholders equity has fallen 58%, to $191 million at the end of June. Compared with a year earlier, nonperforming assets in the second quarter had more than tripled, to $328 million, or 7.54% of total assets.

Still, the company's thrift unit remained well capitalized by regulatory standards, with a leverage ratio of 7.01%, a Tier 1 risk-based capital ratio of 9.93% and a total risk-based capital ratio of 11.81%.