A struggling Chinese-American bank in California is being recapitalized with $12 million in fresh equity from an investment bank, insiders, and local investors.
The cash injection will bring American International Bank's capital to 8.5% of assets, which total $240 million.
The Los Angeles-based bank has been under state and federal orders, including one issued last month, to raise its capital level to at least 6.75%.
Under the offering plan, the bank will also get a new chief executive officer and business plan as well as seven new directors for its 11-member board. Details are to be announced and the offering is to close today.
"A new day has dawned for the bank," said Gregory A. Mitchell, senior vice president of Hovde Financial Inc., a Washington, D.C.-based investment banking firm that is leading and participating in the recapitalization. "This is a company that's going to soar."
Like many California banks, 14-year-old American International, principally owned by Taiwanese-Americans and foreign investors, ran into trouble with real estate loans in the early 1990s.
It lost more than $40 million over four years, and Tier 1 leverage capital dipped to 2.78% at yearend.
"They just did really poorly and made a lot of bad real estate loans," said David L. Scott, chief state bank examiner. "They just had a great deal of difficulty working their way out of them."
Regulators ordered American International to cut bad assets, enhance lending policies, and strengthen management as well as boosting capital.
The equity infusion consists of a $4.2 million private placement of convertible preferred stock and an $8 million offering of common stock. The preferred stock will be divided between a new hedge fund being created by Hovde, which will take a $2 million position, and insiders and affiliates of the bank.
The common stock will be sold primarily to business leaders and high- net-worth individuals in the Taiwanese-American community. About $2 million of stock will be purchased by a New York-based institutional investor and a single non-Asian investor.