A Delaware bankruptcy judge overturned an objection from the U.S. Treasury Department, ruling instead to markedly reshape the terms of a deal for Michigan-based Talmer Bancorp’s bid to buy First Place Bank.
Last week, U.S. Attorney Charles M. Oberly decried the “expedited nature of the sale proceedings,” writing that they were occurring too fast in a process that unfairly favored Talmer and complicated other institutions’ attempts to place competitive bids on the purchase of First Place.
At issue, according to court documents, was Treasury’s concern it would be left holding $72.9 million in Troubled Asset Relief Program funds paid to First Place in 2009. Oberly argued that if Talmer was allowed to acquire the bank for a purchase price of $45 million, free and clear of all debt and financial encumbrances, Treasury likely would not be repaid.
On Monday, Judge Brendan L. Shannon recognized some of those grievances by compromising and amending the bidding procedures to foster more competitive bids.
However, the deal has morphed into one that could find Talmer paying $45 million for the bank while also incurring a sizable amount of First Place Financial Corp.’s debt.
FPFC, the holding company of First Place Bank, initially filed for bankruptcy Oct. 29. Beginning in 2003, the company issued about $60 million in high-risk bonds that make up a majority of its debt.
With Judge Shannon’s ruling, Talmer has agreed to both purchase First Place Bank and take on that $60 million in debt — a drastic change to its initial debt-free commitment.
According to a source close to the bankruptcy proceedings, who wished not to be named because of the case’s financial implications, if the sale is approved, Talmer immediately would pay $45 million in cash to the bond holders. It would then be required to pay them an additional $15 million, payable in full by 2033, with a 2 percent annual interest rate.
In exchange for Talmer’s increasing its consideration, FPFC also will include additional assets left over after the sale of the bank to soften the pot for the Michigan-based company. Those assets have not yet been determined, but represent a new element in Talmer’s acquisition, considering its initial bid was only for First Place Bank.
To allay the treasury’s concerns, Judge Shannon worked out a compromise that reduces the initial $5 million fee expected to be paid to Talmer, as the lead bidder, if it was outdone by a competitor.
The breakup fee now stands at $3 million, and a $2.5 million overbid requirement for other institutions seeking First Place has been reduced to $1 million to help bring in more bids and lift the “chilling effect” on competition cited by the treasury.
In all, 44 organizations were solicited in shopping First Place Bank when it became evident that FPFC could no longer withstand the debts it occurred in its Michigan loan portfolio.
Officials at both FPFC and Talmer have long maintained competition for the bank was robust. On Monday, officials with both banks told The Vindicator that they expected delays.
Now that Judge Shannon has amended provisions related to bidding, a sale hearing to approve the bankruptcy in U.S. Bankruptcy Court in Wilmington, Del., has been rescheduled for Dec. 14.
Barring any technicalities that arise at an auction for competitive bids Dec. 13, Talmer could be approved at the sale hearing the next day, at which point it would need approval from the U.S. Department of Justice.
With this final regulatory step, the earliest Talmer could be granted a green light on the sale is Dec. 31.