Broadway in L.A. Moves a Step Closer to Capital Raise

An institutional investor at Broadway Financial (BYFC) has agreed to swap its preferred shares for common stock to help the Los Angeles company attract more capital.

The $442 million-asset company announced Monday that the unnamed shareholder will exchange its Series A preferred shares for new common stock at a 50% discount to the liquidation price of $550,000.

The agreement is a crucial step in a multi-pronged recapitalization effort that Broadway unveiled last month.

The key element of the plan is the conversion of $15 million of preferred issues to the Treasury Department as part of the Troubled Asset Relief Program. The Treasury has agreed to swap the shares at a 50% discount, but only if other Broadway could convince other preferred shareholders agreed to do the same. The agreement also requires Broadway to raise $5 million in fresh equity.

Broadway's thrift unit was still well capitalized at the end of the 2011, but it lost more than $8 million last year and its level of problem loans has been rising steadily.

In a news release, Broadway's President and Chief Executive Wayne-Kent Bradshaw said that Monday's agreement with the institutional investor "represents another significant step in our process to recapitalize the company, raise additional capital, enhance our common equity base and strengthen our operations.'