First Place Financial Corp. has hit a snag with its Chapter 11 bankruptcy proceedings after the U.S. Treasury Department filed an objection against Michigan-based Talmer Bancorp’s $45 million bid to buy its subsidiary First Place Bank.
Documents filed last week in U.S. Bankruptcy Court by U.S. Attorney Charles M. Oberly show Treasury considers the bid too low and raised concerns the United States will be left holding $72.9 million in debt paid to the bank in 2009 under the government’s Troubled Asset Relief Program, passed in 2008 at the height of the financial meltdown to rescue failing banks.
“The United States objects to the sale process because it is occurring too quickly,” wrote Oberly in a document filed Nov. 20 in U.S. Bankruptcy Court in Wilmington, Del. “Under the current bid procedures, the debtor seeks to sell substantially all of its assets free and clear of all liens, claims and encumbrances within 39 days of the petition date.”
FPFC first filed for bankruptcy protection Oct. 29, when it determined it no longer could reconcile the debt it incurred when its Michigan real-estate ventures faltered in 2008. In addition to its debts with the treasury, the holding company is $62 million in debt from a series of high-risk bonds it issued in 2003 and 2005.
The Treasury Department contends that FPFC has not maximized the value of the bank, which primarily holds $39 million in net operating loss, in addition to providing an unfair advantage to Talmer Bancorp by giving it protections that will “chill bidding.”
When it became evident FPFC would require bankruptcy protection, the company began shopping First Place through an investment bank, which eventually turned out offers from 44 organizations interested in all or some of the bank’s assets.
Talmer Bancorp was selected as the best solution to strengthen First Place’s capital base and help it meet the requirements of federal regulators.
In being selected as the “stalking-horse bidder,” however, Talmer was granted special protections that would make it impossible for a competing bidder to prevail unless it bids $51 million, according to the court documents.
The proceedings also are garnering national attention, with the revelation that W.L. Ross & Co., owned by the billionaire investor Wilbur Ross, is Talmer Bancorp’s leading investor, holding 24 percent of the company’s shares.
Ross made his fortune as an opportunity investor known for buying ailing steel companies when no one else would and guiding other businesses through the restructuring process.
In an interview with The Wall Street Journal, Ross said First Place was shopped extensively to other bidders and his offer was the highest, maintaining that “you can’t invent bids that don’t exist.”
Shellie Maitre, Talmer’s chief marketing officer, agreed, saying, “[First Place] was shopped extensively, and their investors were looking for parties interested in buying the bank — we had what they deemed to be the best bid.”
A Dec. 7 hearing originally was scheduled to approve the sale. Officials with First Place could not be reached to comment Monday. Maitre said those close to the bankruptcy process expected delays to occur.