Magazine article American Banker

California Thrift Completes Controversial Recap, but Fails to Sell Buyout Option

Magazine article American Banker

California Thrift Completes Controversial Recap, but Fails to Sell Buyout Option

Article excerpt

In a financing coup that's expected to get it out of hot water with regulators, Fidelity Federal Bank recently completed the initial part of a $137 million recapitalization.

The Glendale, Calif.-based thrift announced last month that it had raised $118 million through sales of preferred and common stock and had obtained $28 million of commitments to buy more common stock by mid-December.

Even after the deduction of nearly $9 million of underwriting discounts and commissions, the recap should exceed the thrift's initial goal of raising $110 million.

But one part of the plan was dropped: the sale of an option to buy the thrift.

Investor relations manager Neil Osborne said that serious negotiations were held with a party he declined to name. He added that Fidelity and the party were unable to agree on a price the thrift considered fair for its shareholders.

Mr. Osborne said that once the financing has been completed, Fidelity Federal expects a supervisory agreement it entered into in June with the Office of Thrift Supervision to be terminated. Among other things, the agreement required the $3.4 billion-asset thrift to establish a plan for becoming well capitalized. Fidelity is adequately capitalized but had warned that continuing loan losses could cause it to become undercapitalized if it could not raise more capital.

Fidelity Federal last turned an annual profit in 1992. Since then, it has lost a total of $326.5 million, including losses of $18. …

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