Beach Community Bancshares Inc. canceled a proposed bankruptcy court-supervised auction of its stake in Beach Community Bank after at least one interested party declined to submit a bid to compete with the stalking horse.
The absence of competing bidders means that a federal bankruptcy judge will consider a motion to approve the Fort Walton Beach, Fla.-based bank's sale to a trust linked to philanthropist, banker and real estate investor David Bolger at a May 18 hearing.
Subject to court and regulatory approvals, the agreement with the Bolger trust is expected to generate consideration of $850,000, of which a net amount of $520,000 will be distributed to Beach Community Bancshares creditors, according to a May 15 affidavit by President and CEO A. Anthony Hughes. The company previously reported nearly $14.7 million in outstanding obligations related to subsidiary trust preferred securities, so the proposed consideration implies recoveries of approximately 3.5 cents on the dollar.
The agreement also contemplates that the bank will issue approximately $100 million of new equity securities through certain written stock subscription agreements. The equity raise is contingent upon regulatory approval, and the stock subscription agreements have an "outside date" of July 5 by which the transactions must close.
Beach Community Bancshares retained Teneo Securities LLC in March to provide general restructuring advice and to assist in the marketing and sale of the bank through the Chapter 11 process, among other tasks.
Christopher Wu, president of Teneo Restructuring, declared on May 15 that his firm approached 297 parties in connection with its retention. The contacted parties included 287 banks that maintain a presence in Florida, Georgia, Alabama, Mississippi and Louisiana, as well as 10 private equity investors. Of them, Wu said, 98 "passed on the opportunity for a variety of factors specific to their own situation or the structure of the transaction."
Four parties executed written nondisclosure agreements and obtained access to a data room that Teneo set up, Wu said. One of them, Home BancShares Inc., engaged outside counsel and sought to become a qualified bidder under the auction procedures approved by the bankruptcy court, he added. The Conway, Ark.-based company elected not to submit a bid, though Wu said that Beach Community Bancshares had found it to be a qualified bidder.
Home BancShares, through its Centennial Bank subsidiary, is no stranger to auctions conducted under Section 363 of the U.S. Bankruptcy Code, particularly as it pertains to Florida-based institutions. It acquired Sarasota, Fla.-based Bank of Commerce in February 2017, and Tallahassee, Fla.-based Premier Bank in a transaction that closed in December 2012. The latter deal, like the Beach Community Bank transaction, involved a debtor bank holding company that filed a Chapter 11 petition in the U.S. Bankruptcy Court for the Northern District of Florida.
Beach Community Bancshares "has been earnestly engaged in an effort to maximize the value of its sole asset, the stock in the Bank, from the 2010 onset of its difficulties, [and] it is convinced ... that the consummation of the proposed sale represents the best opportunity for creditors and all parties in interest," Hughes said.
The sale motion faces an objection from Presidio Recovery Fund LLC related to a litigated claim against the company and the bank. Beach Community Bancshares has argued that the successful completion of the sale and recapitalization process will make the bank a more attractive defendant from which the fund can seek the repayment of its disputed claims, which pertain to the alleged misappropriation of funds within Beach Title Services LLC.