“We have not lost money, we don’t anticipate to lose money, and the loans are up to date,” he said.
On May 2, the lawsuits will go to mediation, with all parties, including U.S. Century’s insurers, represented.
Miami attorney Thomas Tew said he has been retained as special counsel to the bank “to assist in working on various scenarios that might lead to a settlement of the litigation and the closing of the new financing.”
Meanwhile, U.S. Century has worked to reduce its overall non-performing loans from $230 million at year-end 2011 to $98 million at the end of 2012, through loan work-outs and packaged sales to individuals and institutional buyers. As a result, the bank increased its capital ratio from about 4 percent at year-end 2011 to 4.6 percent at the end of 2012. But it is still far below the 8 percent regulators mandated.
And the bank, which has reduced its staff through attrition to 260 from 295, has yet to return to profitability. For 2012, U.S. Century lost $10.1 million, compared to a loss of $79.7 million in 2011. The 2011 results included $70.3 million in provisions for loan losses, compared to $1.9 million in loan loss provisions in 2012.
In recent years, under the weight of regulatory pressure, the bank explored multiple avenues to survive, including “possibly recapitalizing the bank, selling Century common stock in public or private offerings, selling branches and related assets, finding a strategic merger partner and considering other strategic alternatives,” the C1 prospectus disclosed.
Numerous attempts failed.
In 2009, the bank sought to raise $20 million in a private offering from existing shareholders but could only raise $2 million, according to the prospectus.
In June 2010, U.S. Century hired Keefe, Bruyette and Woods, which contacted more than 130 potential investors, including 11 “strategic acquirers,” the prospectus said. A total of 57 non-disclosure agreements were sent, and 43 were executed. By October 2010, Keefe and the bank’s management team held 10 meetings with potential private equity investors in New York. Six “strategic acquirers in the financial services industry” performed on-site due diligence and met with the bank’s management, the prospectus discloses.
But no formal offers were made.
In April 2011, the bank hired another investment bank, Nomura Securities International, to help raise capital. And in June 2011, discussions began with a potential new management team, to be backed by two private equity firms that would each put in 24.9 percent of a $250 million recapitalization. Nomura reached out to 42 more potential investors, 19 of which signed non-disclosure agreements, according to the prospectus.
But in September, 2011, one of the private equity firms backed out, so efforts began to replace its 24.9 percent equity share. By November 2011, the proposed new management team also walked away from the deal.
The bank’s problems continued. After making its first scheduled payment on $50.2 million in TARP funds, U.S. Century failed to make eight more scheduled quarterly payments. As a result, the Treasury Department appointed an observer to the bank’s board of directors.
Finally, hope was ignited when C1 Bank agreed to buy U.S. Century at the end of August, with plans to inject $100 million in capital into the combined bank.
Yet shareholders were to receive just $2.5 million from the sale, or about 1.7 cents on the dollar. As part of the deal, the bank said it also would pay $6.27 million to the federal government to settle its TARP debt.
Despite much dissent among shareholders, a majority approved the sale at a November meeting — with two armed police officers present.
But C1 called off the deal in December, 12 days before it was due to be completed, largely because the banks could not meet certain pre-merger conditions, such as closing before the end of the year, as well as other contractual requirements.
The next step
Now, U.S. Century is looking to the future with its proposed recapitalization. Dávila said that this deal will be better for existing stockholders than C1’s.
Next comes signing the definitive agreement and getting shareholder and regulatory approvals.
“We’ve been in communication with all the regulatory agencies, and we’re a little ahead of schedule and very happy so far with the result of all the meetings,” Tate said.
Tate and Rok — who have known each other since high school — and Perez have a proven track record in buying, stabilizing and monetizing distressed assets, working as a team for the past 4½ years.
They have bought more than $600 million in assets during that time, including the note on the Omni Center property, which they bought for $100 million and sold within months to Genting Group for $161 million.
Though perhaps not as well known as Perez until now, Jimmy, 49, and Kenny Tate, 61, are third-generation real estate developers. Their father, Stanley Tate, has been a developer in South Florida since the 1950s and was named chairman of the Resolution Trust Corp. by former President Bill Clinton. Over the years, Jimmy and Kenny have worked in various aspects of distressed property, debt and mortgage workouts.
And Rok, 51, whose company is the largest commercial property owner in downtown Miami, has direct experience in banking. His family was the majority owner of TransAtlantic Bank, and he sat on the board of directors and on bank committees until TransAtlantic’s sale in 2006.
The plan is for Tate, Rok and Migoya, a former banker, to join U.S. Century’s board.
“The new group will bring strong knowledge and expertise,” Dávila said, “and it will further and enhance the knowledge and expertise we have within the bank.”
Once U.S. Century’s recapitalization is completed, it will add more consumer products and services and diversify its loan portfolio further beyond real estate, he said. The bank also plans to eventually add additional branches in Broward County.
“This bank has gone through a lot and unfortunately not all good,” said Rok. “I think its going to take this type of investment group and leadership to bring this bank back to where it should have been and where it needs to go. It’s going to be a lot of work.”