Broadway Financial Corp. in Los Angeles announced Wednesday that the Treasury Department has agreed to take a 50% haircut on its holdings to help bolster the company's recapitalization efforts.
The $500 million-asset Broadway said the Treasury has agreed to exchange the $15 million of preferred stock it issued to the company as part of the Troubled Asset Relief Program for common equity at 50% discount. The accumulated unpaid dividends would exchange at par.
Broadway said that the holders of $1 million of other preferred shares have also agreed to accept common equity at a 50% discount. The Treasury's exchange is conditioned by the other preferred shareholders accepting common equity and Broadway raising an additional $5 million of fresh capital.
Broadway received $9 million from the Treasury in November 2008 and got an additional $6 million when the program was expanded for small banks in late 2009, according to Treasury data. Broadway's thrift, which is a certified community development financial institution, had a leverage ratio of 8.87% and a total risk-based capital ratio of 13.24% at Dec. 31. However, the thrift is dealing with a high level of nonperforming assets. The exchange agreements better position Broadway to raise additional equity, Paul C. Hudson, Broadway's chief executive, said in a press release.