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Preferred holder wants CIB Marine to sell, threatens legal consequences

A bankruptcy case could be back on the table for Waukesha, Wis.-based CIB Marine Bancshares Inc., according to a prominent investor, if the company does not fulfill a commitment it made in 2009.

On March 29, Robert Clutterbuck, managing partner of Cleveland-based Clutterbuck Capital Management LLC — a firm that owns a large amount of the company's preferred stock — sent a letter to shareholders detailing a proposal to the company, which calls for CIB Marine to "immediately begin the sale process" with an investment banking firm.

All initial proceeds would be issued to common shareholders until they receive 50 cents a share. Thereafter, proceeds would be distributed to preferred shareholders until they receive $95.00 a share. Remaining proceeds would be distributed to common shareholders.

CIB Marine executives could not be reached for comment as of the time of publication.

In 2009, the company received shareholder approval of its trust preferred stock to exchange debt securities for preferred stock. Subsequently, the company filed a pre-packaged plan of reorganization seeking bankruptcy protections. Under the plan, Clutterbuck's letter asserts, CIB Marine agreed to an orderly sale after stabilization or, failing that, an orderly liquidation.

Clutterbuck said his company intends to file a legal action regarding CIB Marine's bankruptcy case on or before May 8 if its board "does not engage in substantive discussions" regarding the proposal in the upcoming weeks.

Within the last year, CIB Marine has "made more money than the 10 years collectively before that," Clutterbuck said. In CIB Marine's fourth-quarter earnings release, the company reported a net income of $1.4 million, or 4 cents per share, compared to a loss of $800,000, or 4 cents per share, during the same time period in 2015.

"By any stretch of the imagination, that would mean that they have stabilized and therefore have to fulfill not just their promise, but their written and their stated commitment," he said.

In 2016, Clutterbuck Capital Management pushed for an alternative CIB Marine director, but failed due to a technicality. At that time, CIB Marine also shot down an offer by investor Donald Wilson, a former bank executive who proposed buying the company and taking over leadership responsibility.

Clutterbuck's proposal was first presented to and rejected by the CIB Marine board in December 2016. Clutterbuck said the rejection came with a "thinly veiled" threat that a public disclosure of the offer would be in breach of a confidentiality agreement. Clutterbuck said although the letter never contained private information, the confidentiality agreement has now expired.

Clutterbuck said he has received feedback from shareholders indicating they would be "very much in support" of the proposal. He said they are being encouraged to contact CIB Marine.

"We cannot imagine any financial performance by CIB Marine over the next two years — or even five years out — that could create better value for equity holders than accepting this proposal," he said.