Essex Bancorp, a Virginia Beach thrift holding company, took another step toward righting its embattled company.
A majority of the company's limited partners voted last week to simplify the $320 million-asset company's structure by merging its limited partnership arm, called Essex Financial Partners, into the holding company.
The move was the latest step engineered by its chairman and chief executive, Gene D. Ross, toward making the company a viable entity after its near failure 2#1/2 years ago.
The common stock of the holding company will replace that of the limited partnership units - in a two-for-one swap - on the American Stock Exchange, according to a company statement.
Mr. Ross, who was hired in the spring of 1992 by special partner PaineWebber Inc. to rescue the company, said in a statement that the consolidation will increase investor representation in the company and will further simplify its complex corporate structure. This streamlining should facilitate capital raising in the future, he said.
The company is currently attempting to raise capital. It filed a registration statement with the Securities and Exchange Commission on Dec. 22 in an effort to raise about $12 million sometime in the second quarter, Mr. Ross said.
Mr. Ross acknowledged that he is "cautiously optimistic" about the offering. Rising interest rates and the fact that the stock is trading at a considerable discount to book value could hinder the rights offering, he said.
On Monday, the stock was trading at $5.62, which is a 42% discount to book value based on third-quarter numbers. The stock price doubled last week after the merger, which acted as the equivalent of a reverse stock split. Trading volume has been at a daily average of about 13,000 since the merger, well above its previous trading activity.
Essex has eight offices in Virginia and North Carolina under the name Essex Savings Bank. The company was $4.4 million in the red for last year's third quarter, primarily because of a lawsuit filed by its original investors. The suit applied to the period before Mr. Ross took over, when the company lost more than $20 million over a three-year period because of bad loans, higher capital requirements, and other problems.