The ailing Temecula Valley Bancorp Inc. has lost its lifeline.
A group of private-equity investors that had planned to put $210 million into the California company backed out, Temecula Valley said in a Securities and Exchange Commission filing Thursday.
"It was likely that the investors’ internal rate of return objectives could not be realized for an extended period of time," the filing said.
Frank Basirico, the $1.5 billion-asset company’s chief executive officer, said in a press release that it would keep working to solve its capital woes. An enforcement action from state regulators had given its undercapitalized bank unit a July 6 deadline to raise at least $71 million.
Last month Temecula Valley had announced that a group led by Bancroft Capital LLC and Orient Property Group LLC had signed a letter of intent to take a majority stake in the company. It aimed to have the investment in place by July 1.
In opting out, Douglas McDonald, the founder and president of Bancroft Capital, cited the economy. "We worked tirelessly with the management team at Temecula Valley Bancorp to create a structure that would allow a competitive rate of return for our investors while, at the same time, preserving value for existing shareholders," McDonald said in a press release. "However, given the macroeconomic factors at play and the continued deterioration in market fundamentals, we regrettably could not structure a feasible solution given the challenges that presented themselves."
Temecula Valley has warned in recent months that it might fail, as bad loans made to residential developers in the Inland Empire region spiked. Nonperformers made up 12.2% of its total assets at the end of the first quarter.