First American Gets $40 Million From Sheik to Meet Capital Rules
WASHINGTON - First American Bankshares Inc., an ailing affiliate of Bank of Credit and Commerce International, has received a $40 million capital infusion from Sheik Zayed al-Nahyan, the ruler of Abu Dhabi and principal shareholder of First American.
In addition, Sheik Zayed and his son last week purchased $80 million in First American debt, replacing other note holders.
The $40 million capital infusion should bring First American into compliance with federal capital requirements. It also marks the latest chapter in the unfolding saga of First American and BCCI, which is incorporated in Luxembourg.
Frank Mankiewicz, a spokesman for First American, which has $11 billion in assets and operates seven U.S. banks, said the $40 million will be split among First American and two of its subsidiary banks.
One of the units, First American Bank of Georgia, lost $26 million in 1990 and will receive $17.1 million. The other, First American Bank of Washington, lost $29 million and will get $13.9 million in capital. Both institutions are operating under consent orders issued by the Office of the Comptroller of the Currency.
"With those two [capital] additions, all of the [banks] have at least total 6% equity-to-capital ratios," said Mr. Mankiewicz.
First American is headed by Washington attorneys Clark M. Clifford, and Robert A. Altman, both of whom have come under intense scrutiny from federal prosecutors and banking regulators, who are trying to determine how BCCI may have taken control of the Washington-based banking company.
Mr. Clifford recently gave a deposition before Federal Reserve attorneys, and last week he testified in Washington before a grand jury, according to The Washington Post.
BCCI itself is undergoing a massive restructuring after sustaining heavy losses. In 1989, the company pleaded guilty to money laundering.
The capital infusion for First American is much needed because five of its seven banks lost an aggregate $123 million in 1990, while the two banks that were profitable made $6.8 million. The biggest loser in the group was First American Bank of Virginia, a $3.7 billion-asset bank, which lost nearly $60 million.
Supreme Court Rules
Separately, First American won a major victory Thursday when the Supreme Court reversed a lower court's order to pay $13 million to former minority shareholders of the company.
The shareholders, who were bought out in 1987, sued First American charging that they were misled about the value of their stock by directors. Instead of receiving $60 a share, which the stockholders contend was the fair price, they got only $42 a share.
In a statement released by First American, Mr. Clifford said he was "very pleased" with the decision.
Joseph M. Hassett, counsel for the minority stockholders, said the stockholders would pursue all avenues of recourse under federal and state laws.
Table : Earnings Problems At First American
Five biggest bank subsidiaries and parent; dollars in millions '89 net '90 net '90 returnLocation income income on assetsVirginia $32.0 -$58.9 -1.57%D.C. 14.7 -29.5 -1.56Georgia 10.0 -26.1 -1.50Maryland 14.6 -8.0 -0.52New York 4.3 0.8 0.05
Holding co. total 58.3 -182.5 -1.62
Source: W.C. Ferguson & Co.