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A Minnesota community bank has made an offer to buy American Bank of St. Paul in what would be the first time a bank was forced into a sale over unpaid trust-preferred debt.
October 24 -
A group of investment firms has forced American Bancorp. into liquidation over unpaid trust-preferred debt. Creditors have threatened to go this route before but this is the first time any have followed through, serving as an ominous precedent for the up to 300 banks in danger of defaulting on the hybrid securities.
June 2 -
Debt-burdened holding companies are more often resorting to selling their banks through bankruptcy sales, which is welcome news for lawyers, investment banks and advisors that can earn millions working on such transactions. But such fees have rankled creditors.
July 8
Bidding is over in the first bankruptcy auction to be held at the demand of trust-preferred creditors, but there's no clear winner.
Two Minnesota lenders, the $250 million-asset Deerwood Bank and the $740 million-asset University Financial, are urging a bankruptcy court to name them the winning bidder for American Bank of St. Paul, according to court filings. The $302 million-asset American has asked the court to approve the sale to Deerwood, but the question is up to Judge Katherine Constantine of the U.S. bankruptcy court for Minnesota to decide..
Each sale would be for approximately $22 million, University Financial said in a court filing. University is the parent of Sunrise Banks in St. Paul.
American Bancorp., the parent of American Bank, was pushed into Chapter 11 in May after its debtholders
Potential buyers could bid on the two companies together or separately, and a total of nine bids were received by the Monday deadline, court documents show.
Deerwood, the
A court hearing Thursday to determine the best bid turned into a "prolonged" and "heated discussion" over whether the court should approve the two separate bids, or University Financial's bid for the bank and the servicer together, according to a filing by University.
The filing claims that only about $100,000 separates University's bid and the combined value of Deerwood's and OSP's bids, which is about $22 million. University argues that this is "not a material separation" and that other factors, such as the ease of closing one deal rather than two, should sway the court to accept University's bid.
"The fact that the question of the highest and best bid was hotly debated demonstrates that there are many factors for this court to consider," University wrote in a filing.
Calls to University, University's lawyer, Deerwood and American Bank were not immediately returned.
American Bancorp. is so far the only holding company to be forced into involuntary bankruptcy over trust-preferred debt. The trust-preferred creditors of FMB Bancshares in Lakeland, Ga., have filed for involuntary bankruptcy, but FMB has fought the move and has not yet entered Chapter 11, despite a court ruling in the creditors' favor.
Although its parent company is in bankruptcy, American Bank of St. Paul is healthy and profitable. It earned $3 million in the first nine months of 2014 and had a leverage ratio of 8.74% at the end of the third quarter, according to the Federal Deposit Insurance Corp.
