Magazine article American Banker

Bid Dispute Leaves Minn. Bankruptcy Auction Unresolved

Magazine article American Banker

Bid Dispute Leaves Minn. Bankruptcy Auction Unresolved

Article excerpt

Byline: Chris Cumming

Bidding is over in the first bankruptcy auction to be held at the demand of trust-preferred creditors, but there's no clear winner.

Two Minnesota lenders, the $250 million-asset Deerwood Bank and the $740 million-asset University Financial, are urging a bankruptcy court to name them the winning bidder for American Bank of St. Paul, according to court filings. The $302 million-asset American has asked the court to approve the sale to Deerwood, but the question is up to Judge Katherine Constantine of the U.S. bankruptcy court for Minnesota to decide..

Each sale would be for approximately $22 million, University Financial said in a court filing. University is the parent of Sunrise Banks in St. Paul.

American Bancorp., the parent of American Bank, was pushed into Chapter 11 in May after its debtholders filed for involuntary bankruptcy over $48 million in defaulted trust-preferred securities. That move forced American to auction off its bank, as well as a subsidiary loan-servicing company, AmeriNational Community Services.

Potential buyers could bid on the two companies together or separately, and a total of nine bids were received by the Monday deadline, court documents show.

Deerwood, the stalking horse bidder, offered $17 million for the bank alone, documents show. Under the deal that American urged the court to approve, the subsidiary loan servicing company would be sold to a company called OSP, LLC, in a separate transaction.

A court hearing Thursday to determine the best bid turned into a "prolonged" and "heated discussion" over whether the court should approve the two separate bids, or University Financial's bid for the bank and the servicer together, according to a filing by University. …

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