Temecula Valley Bancorp, along with its wholly owned subsidiary Temecula Valley Bank, has entered into a non-binding letter of intent with Bancroft Capital and institutional investors i
Temecula Valley Bancorp, along with its wholly owned subsidiary Temecula Valley Bank, has entered into a non-binding letter of intent with Bancroft Capital and institutional investors including Orient Property Group.
The letter provides for a cash investment of up to USD210m. Subject to completion of due diligence and the satisfaction of certain other conditions, the Bancroft/Orient group would make a USD105m equity investment in equity securities and an additional USD105m investment in a pool of targeted loans.
The transaction would be structured to meet or exceed Temecula Valley Bank’s regulatory capital requirements.
Pursuant to the letter, it is contemplated that the investors will purchase from Temecula Valley shares of voting securities, an aggregate purchase price of USD105m, which would receive Tier 1 capital treatment.
To the extent preferred stock is issued, it is proposed that the preferred stock would be convertible at a conversion price of USD0.50 per share.
The conversion price of the preferred stock would equate to a premium of approximately 25 per cent over the USD0.40 closing price of Temecula Valley’s common stock on 29 May 2009.
Prior to conversion, the preferred stock would vote together with Temecula Valley’s common stock on an as-converted basis on all matters presented to Temecula Valley’s shareholders.
Additionally, the structure of the transaction contemplates that certain of the investors would contribute USD105m to a separate entity that will be jointly owned by Temecula Valley Bank and such investors. That entity would hold certain non-performing and sub-performing assets.
Upon completion of the proposed investment, the investors would own approximately 95 per cent of Temecula Valley’s fully diluted outstanding equity and would have the right to designate and elect a majority of the board of directors of Temecula Valley and Temecula Valley Bank.
"We are very pleased at the prospect of working with the Bancroft/Orient group as partners in our proposed recapitalization," says Frank Basirico (pictured), Temecula Valley’s chief executive officer. "There is no question that there has been unprecedented economic difficulty in our industry and markets. We believe this transaction, if consummated, would enable our shareholders, customers and employees to benefit in a way not possible in our current form."
Douglas McDonald, founder and president of Bancroft Capital, says: "This transaction represents a unique opportunity to aid a very capable management team in the restoration of its community banking model. Temecula Valley Bank has traditionally been one of the finest small banks in the country and our investment will enable the bank to expand while at the same time addressing the issues in its loan portfolio that have caused the bank distress.’
