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Updated: Pacific Capital posts $61M loss, gets Treasury cooperation in Ford deal

By   /   Tuesday, July 27th, 2010  /   Comments Off on Updated: Pacific Capital posts $61M loss, gets Treasury cooperation in Ford deal

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Pacific Capital Bancorp, the struggling parent of Santa Barbara Bank & Trust, on July 27 reported a $61 million second-quarter loss and said that with the U.S. Treasury agreeing to wipe out $180.6 million in TARP debt in exchange for equity, it now expects to complete a $500 million acquisition by Texas-based Ford Financial Fund by Aug. 31.

 

The Ford deal will get done, according to a Pacific Capital release, without the cooperation of bondholders. Remaining bondholders can elect to cash out at 40 cents to 65 cents on the dollar under a new Aug. 27 deadline, but according to officials the recapitalization agreement will go through regardless.
 

The Ford acquisition — which would leave the Texas private equity firm with up to 91 percent of the bank and heavily dilute shareholders — is critical for troubled Pacific Capital, which faces potential liquidation if it doesn’t satisfy regulators’ capitalization requirements by a Sept. 8 deadline. In May, the banking company agreed to a consent order from the Office of the Comptroller of the Currency, or OCC, under which it must boost its tier one leverage ratio — its capital divided by its assets — to 9 percent and its risk-based capital ratio to 12 percent. At the end of the second quarter, the bank’s ratios were 4 percent and 9.5 percent, respectively.

“We are pleased that we have reached an agreement with Treasury and that Ford has indicated to us that we have made sufficient progress on our tender offers,” Pacific Capital President and CEO George Leis said in a July 27 news release. “These were clearly two of the most critical conditions to completing the Ford investment and their resolution allows us to see a clear path to a targeted closing by the end of August.”

Gerald Ford, the Texas banker behind the deal, said July 27 that, “in our 35-year history in the financial services sector, we have been highly selective in identifying financial services partners, focusing on quality companies that meet our high standards. We believe Pacific Capital is one of the great community bank franchises in California.”

Pacific Capital’s $61 million, or $1.24 per share, loss compares to a $362.6 million, or $7.80 per share, loss in the second quarter of 2009. Combined with a $81 million first-quarter loss, the bank finishes the first half of the year $142 million in the red.

 

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