Four Oaks Fincorp (FOFN) in Four Oaks, N.C., could raise more than $27 million in a securities agreement and rights offering.
The $820 million-asset Four Oaks said in a press release Wednesday that private investor Kenneth Lehman has agreed to buy a significant stake in the company. The company also plans to conduct a rights offering aimed at current shareholders.
Lehman has agreed to buy 875,000 shares of Four Oaks' common stock at $1 each. The company will then hold a rights offering for existing shareholders, including Lehman, in the second quarter. Four Oaks plans to sell up to 26.5 million shares of stock at $1 each as part of the rights offering.
Shareholders will have the right to buy three shares of stock for each share they already own. Lehman will have the opportunity to buy roughly 2.6 million shares in the rights offering, boosting his potential ownership to 3.5 million shares.
If there is any stock left over from the rights offering, Lehman has agreed to buy 10 million shares, including those he already owns. He could raise his total ownership in Four Oaks to 16 million shares, unless his stake would put the company's deferred tax asset at risk via a change in ownership.
The stock sale will provide Four Oaks with a shot of much-needed capital. The company is operating under a May 2011 agreement with the Federal Reserve Board that requires it to meet certain capital requirements. The company has struggled to find investors and it was a target the Justice Department's "Operation Choke Point" probe, which investigates banks' ties to payday lenders. Four Oaks reached a $1.2 million settlement with the Justice Department in January, helping to dispel its troubled aura.
Lehman, a former banking lawyer, has emerged as a key community bank investor in recent years, buying large chunks of lenders including Liberty Bell Bank (LBBB) Marlton, N.J.; Delmar Bancorp in Salisbury, Md.; Marine Bank & Trust in Vero Beach, Fla.; and First Capital (FCVA) in Glen Allen, Va.
Sandler O'Neill was Four Oaks' financial advisor.