Nine months after it unsuccessfully sought to raise capital in the public market, Hampton Roads Bankshares Inc. in Norfolk, Va., has persuaded private-equity firms to get on board.

The undercapitalized, $3 billion-asset company announced Monday that Carlyle Group and Anchorage Advisors LLC had each agreed to buy $73 million of Hampton Roads common stock as the lead investors in what is expected to be a $275 million capital raising. The additional capital is expected to come from institutional investors and through a $20 million rights offering to existing shareholders.

The reversal of fortune reflected both changes that Hampton Roads has made and broader shifts in the mergers and acquisitions market, where private equity is turning its sights to struggling institutions after having trouble nabbing failed banks.

"We are seeing private equity getting more aggressive as the economy shows some signs of a rebound," said Martin Friedman, portfolio manager of FJ Capital in Arlington, Va., which has a small investment in Hampton Roads. "And we are seeing more deals like this as they have found it is an easier route … than through buying a whole bank out of failure."

Hampton Roads, a $543 million-asset company two years ago, is the result of two acquisitions completed in 2008. It bought the $269 million-asset Shore Financial Corp. in Olney, Va., in June of that year.

Then, amid the financial free fall of September 2008, it struck a deal to buy Gateway Financial Holdings Inc. in Virginia Beach, a $2.1 billion-asset company whose capital was depleted by securities writedowns required after the government's conservatorship of Fannie Mae and Freddie Mac.

"We grew as a company through the acquisitions of 2008 very quickly," Doug Glenn, Hampton Roads' executive vice president, general counsel and chief operating officer, said in an interview Monday. "The growth alone would have been a challenge. The fact that it happened in the teeth of the economic downturn just magnified those challenges."

Nearly two-thirds of the $3 billion-asset consolidated company's portfolio is connected to commercial real estate or construction loans. As of March 31, more than 9% the loan portfolio was nonperforming, compared with 6.3% at the end of the third quarter.

Though the company's credit quality has worsened since last fall, Friedman said Hampton Roads has become more realistic in accounting for its troubles since its attempt to raise capital last August.

"I think at that time they were just starting to realize some of their problems," Friedman said. "Problem loans are still really high, but they started taking a lot of provisions; the reserves are a lot higher."

Glenn said the company's management team has spent the past nine months trying to demonstrate its competence to investors. Further, working with private-equity investors requires allowing for a greater amount of due diligence than with a public offering.

Private-equity investors need a greater opportunity to get comfortable with the company.

"We would have loved to have raised capital last August, but it just didn't work out," Glenn said. "The good news is that, in the process, we met a lot of investors and heard their concerns, and we've spent the last nine months working on those issues."

As of March 31, Hampton Roads and its Bank of Hampton Roads unit were undercapitalized. The Shore Bank unit, however, is well capitalized. (It is not related to ShoreBank Corp. in Chicago.)

Glenn did not give pro forma capital ratios but said the company is confident the $275 million infusion would suffice to "substantially strengthen our balance sheet and move our company forward."

The investment would boost shareholder equity by 176% from the March 31 level.

Another important condition remains, however: Hampton Roads' preferred shareholders, including the Treasury Department, must convert their investments to common equity.

Though Glenn said the recapitalization is solely geared toward rebuilding the company's capital, Friedman said the private-equity investors probably will push the company toward acquisitions once its credit quality improves.

He said he is still deciding whether to participate in the rights offering.

"I'll look at it. They are going to be increasing the number of shares outstanding by a lot," Friedman said. "But this could be the saving grace for the company. It is dilutive but certainly less dilutive than the FDIC taking it over."

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