Cascade Bancorp finally secured the capital it has been pursuing for months, with the help of a new investor — Wilbur Ross.
The $2 billion-asset company in Bend, Ore., said late Tuesday that it had struck a deal to sell $177 million of common stock to W.L. Ross & Co. and Leonard Green and Partners LP, who will join David F. Bolger and Donald Marron's Lightyear Fund II in the recapitalization.
Cascade has been under a regulatory order to raise capital since August 2009, and analysts said its future depended on completing a deal.
"This is a bank that's had very good operating results before it got into these issues during the crash," Marron said in an interview Wednesday. "We think it's a very good area of the country, a high-growth area."
Marron said Lightyear had been pursuing the investment for nearly two years. In November 2009, Lightyear and Bolger agreed to invest $65 million in the capital-strapped company on condition that Cascade raise another $85 million by May 31.
New investors were unwilling to join the effort until Cascade could trim some of its debt, and Bolger and Lightyear pushed back the deadline several times as the company sought more funding.
Under the agreements, Lightyear, Ross and Green will each invest about $45 million — Lightyear raised its initial commitment by $5 million — and each will hold about a 24.35% stake. Bolger, previously Cascade's biggest shareholder, will invest about $25 million for a 14.4% stake.
The investors will buy common stock at 40 cents a share, an 11.1% discount to Tuesday's closing price. Cascade is also planning a 1-to-10 reverse stock split on Nov. 22 to reduce the number of shares outstanding to 2.85 million, from 28.5 million.
Cascade stock soared, rising 57.8% Wednesday to close at 71 cents a share.
The investments will boost the company's capital ratios to "well-capitalized" status — with a leverage ratio of more than 10% — letting employees get back to basics, Patricia Moss, Cascade's chief executive, said in an interview Wednesday.
"Our plans for that capital are to put it in its most effective use in the Northwest, whether that's organic growth or growth in other ways," Moss said, adding that Cascade would become interested in acquisitions.
The agreement also requires Cascade to repurchase its outstanding trust-preferred securities at an 80% discount.
The exchange had been a sticking point that hampered the deal last summer, when Cascade sued Cohen & Co. Financial Management for failing to honor an agreement to exchange its trust-preferred securities at the discount. The lawsuit was later withdrawn.
Moss said she could not comment on whether the holders of trust-preferred securities had agreed to the discount or when the deal would close. The company is expected to make more disclosures in the next few days through a filing with the Securities and Exchange Commission.
Representatives from W.L. Ross, Lightyear and Leonard Green will also join Cascade's board. "They bring some real talent to the board and obviously some experience," Moss said.