Alan Levan will need to get still more creative the next time he tries to sell off BankAtlantic Bancorp's Florida thrift.

Levan, the company's chairman, president and chief executive, thought he had crafted an "elegant solution" to sell the bank to BB&T Corp. until a judge's ruling Monday crushed the proposed sale. Now, Levan must play nice with holders of BankAtlantic's trust preferred securities to salvage the company he spent decades building.

For now, those investors are keen on BankAtlantic's value, indicating that they are open to playing a bigger role in solving the company's problems.

"We think the bank is very good. That's why we've been so adamant about protecting our interests," says John Scannell, the chief operating officer at Hildene Capital Management LLC, which led the legal challenge that derailed the sale to BB&T.

The "holding company has a lot of issues, but the bank itself is a very good institution," Scannell says. "We think that there are a number of people who would be very interested in buying it."

On Monday, Delaware Court of Chancery Judge J. Travis Laster nixed an agreement by the Ft. Lauderdale, Fla., company to sell off the thrift's branches, deposits and most of its performing assets to BB&T. The judge determined that investors in the thrift company's trust preferred securities must be repaid or taken on by the acquirer. The original agreement, unveiled in November, would have left the parent company with mostly nonperforming loans and its debt tied to the trust preferred securities, dampening the debtholders' likelihood of accelerated repayment, according on a court order.

Still, industry observers say BankAtlantic has several options, including the potential of restructuring its deal with BB&T or trying to sell to another company. But the terms may not be as elegant to Levan now that the court order gives BankAtlantic's trust preferred securities holders more say in the company's future.

Scannell says the court's intervention gives his company more confidence as it confronts other banking companies that attempt to circumvent trust preferred investors. "We intend to reach out to some of those institutions" that might emulate BankAtlantic's agreement with BB&T, he says. Hildene's objective is to "make sure they realize that if they try to go ahead with the transaction that we'll either try to stop it or hold them liable for defrauding creditors with full knowledge that these sorts of transactions aren't permitted."

BankAtlantic owes Hildene and other holders of trust preferred securities more than $320 million. The holders argued in court that the investments should have been transferred to BB&T or paid off by BankAtlantic. Levan testified during the legal proceedings that BankAtlantic was unable to pay immediately. Observers say it is unlikely that BB&T would be willing take on the trust preferred securities considering their conservative approach to acquisitions.

"We're very selective," Kelly King, BB&T's chairman and CEO, said in a January interview. "I've been very clear about our criteria: it has to be strategically attractive, we have to control the asset quality issues and it has to be economically attractive to our existing shareholders. Otherwise, why do it?"

Using that rationale, BB&T is unlikely to buy the entire company because doing so could be dilutive for shareholders and could expose the Winston-Salem, N.C., institution to more losses.

"They could try to structure some type of conduit where the real estate goes into a trust and the proceeds go to" holders of the trust preferred securities, says Robert Patten, analyst at Regions Financial Corp.'s Morgan Keegan & Co. He says BB&T could put in a "credit enhancement" such as a letter of credit or a first-loss guarantee on a percentage of the assets. "There are ways to do this without taking on more dilution," he says.

Judge Laster noted in the ruling that Levan received a $50 million offer from a large bank in November 2010 that included capital to help repay trust preferred holders. Levan rejected it because he reportedly wanted at least $115 million and severance packages for all the executives, even those not retained.

Levan could not be reached for comment.

Much has changed since that offer and even BB&T's offer last November. A key shift took place in January when the Securities and Exchange Commission filed a civil securities fraud and accounting fraud lawsuit against Levan and the parent company. The litigation could lower any bids that could come in, observers say.

"Now with BankAtlantic, we know it comes with a lot of strings," says Ken Thomas, a bank consultant and economist in Miami. "A lot of banks that would have looked at this before, with all the additional drama now, I don't think they would be as interested or the price would be markedly different."

Thomas says it could make other competing Florida banks, such as BankUnited Inc. in Miami Lakes, Fla., which recently shopped itself, look even more attractive.

"I've never seen a bank where there are so many different parties involved," Thomas says of BankAtlantic. He likened it to a crime scene television series where detectives use pins to trace back to the victim. "You almost need a diagram to figure out what's going on here and all the different players involved," he says.

BankAtlantic could still pursue a rights offering. The company said on Feb. 16 that it would do so by last Monday if the deal fell through. It's unclear whether they would reconsider that option.

The final and most tricky option could involve the holding company filing for bankruptcy protection to force a recapitalization and sale of the thrift. The move was successfully completed by AmericanWest Bancorp in Spokane, Wash., in late 2010 after it struggled to get support from holders of its trust preferred securities. Private equity-backed SKBHC Holdings LLC won an auction, paying $6.5 million for AmericanWest's bank.

Hildene filed an objection in AmWest's case but the court denied it, saying that debtholders were represented by a trustee that had consented. Scannell says bankruptcy seems unlikely for BankAtlantic though he is open to it with certain caveats.

"If someone has to go through bankruptcy to get a deal done, we're fine with that. So long as it is an open process and there is an opportunity for multiple bidders to participate," Scannell says.

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