There are signs that the $500 million investment by Ford Financial Fund into Pacific Capital Bancorp is inching forward. An increased offer to bondholders has met, we understand, with positive responses from a large group of investors. The expiration of TARP funding this fall means the U.S. Treasury might be highly motivated to swap its $180 million in debt for equity, and shareholders have little choice but to accept Ford’s terms or be totally wiped out.
Pacific Capital and its Santa Barbara Bank & Trust operation are a critical lynchpin in the region’s economy. Closing a transaction, even on less than optimal terms, is far better than having the Federal Deposit Insurance Corp. take over.
That could create a mini-Lehman Brothers ripple effect for the region’s economy — and cause even more distress for area businesses, large and small.