BancTrust seeks investors, not buyers

Published 12:23 pm Monday, February 20, 2012

By Tim Reeves

The Selma Times-Journal

A December filing with the Securities and Exchange Commission caused some to speculate that BancTrust Financial Group — the holding company for BankTrust — might be sold.

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Some media reports last week said efforts by the bank to find investors, gain new capital and improve its balance sheet are being done to improve its image to potential buyers.

Bibb Lamar, chairman and CEO of BancTrust, said last week that the bank simply was seeking additional investors and not seeking to sell.

As his company moves into multiple floors of a refurbished downtown Mobile office building Lamar remains puzzled as to how what he considers routine filings with the SEC led some to think the bank is for sale.

BankTrust operates community banks in Selma, Greenville, Demopolis, Eufaula, among others in Alabama and Florida.

The capital the bank is seeking to raise, Lamar said, will improve its balance sheet as to:

old non-performing real estate loans in Florida.

clearing up the bank’s commitment to the Troubled Assets Relief Program (TARP).

remaining obligations in the bank’s purchase of Selma-based People’s Bank & Trust Company.

Dr. John Jahera Jr., co-editor of the Journal of Financial Economic Policy and professor with Auburn University’s College of Business, said the effort by BancTrust to seek capital investors is normal.

“Banks are always in the process of seeking capital infusions to strengthen their positions for expansion, growth opportunities, perhaps to meet additional regulatory requirements. There are a whole host of reasons that could lead to seeking additional capital,” Jahera said.

As for the speculation that the bank could be positioning itself to sell, Jahera did not know of any takeover attempts or sale opportunities, but said the past 20 years have seen tremendous activity in banks being consolidated.

“We’ve seen a lot of bank consolidation, really in the past 20 years since the Riegle-Neal Interstate Banking legislation passed in 1994. Today we have nearly half the banks in the country because of the consolidation; much bigger banks, but fewer banks,” Jahera said. “Any bank is a potential takeover target or an acquirable target. Certainly getting out from any of their TARP requirements would make them more attractive, but without any knowledge of any specific takeover event, I would think it’s pure speculation at this stage.”

Details of the filing with the SEC

On Dec. 19, BancTrust filed a Form 8-K with the Securities and Exchange Commission, stating the company had “entered into a letter agreement with Capital Z Partners III, L.P. and Pine Brook Road Partners” as part of a planned capital raise.

According to the SEC, a Form 8-K is “the ‘current report’ companies must file with the SEC to announce major events that shareholders should know about.”

A move by BancTrust to raise additional capital through new investors is considered a “major event.”

The filing also states the bank and investors have established a March 15 deadline to “sign and execute definitive documentation” confirming the agreement and investment.

Some media reports say if the groups are not able to reach a deal by the deadline, BancTrust would then owe the investors a $1.75 million termination fee. This, Lamar said, is “not correct at all.”

“These groups are so keen upon doing that investment, that they asked the bank to sign an exclusivity agreement, and what it says is that we will not go out and try to find anybody in lieu of them to invest in the bank. We will not solicit offers to buy the bank …” Lamar said. “If we breach that agreement between now and March 15, we will then owe them a ‘break up’ fee of $1.75 million.”

“We are working diligently to finish this up. There are a lot of moving parts when you do something like this,” Lamar said. “I am hopeful the capital raise transaction will go through.”

Jahera said, while he doesn’t know too much about the two investment companies, he does know investing in BancTrust is the type of investment these firms usually target.

“This is their target market. Find a bank and infuse capital. Now, at some point, a company is going to hope for a good return on their investment,” Jahera said.

Reaction to the news

For Lamar, the biggest issue faced when media reports said the capital raise was an effort to position the bank for sale was the reaction from employees.

He said the company spent time communicating with employees that this was simply an effort to seek investors, not seek buyers.

“Anytime a bank is sold, scores of employees lose their jobs,” Lamar said. “We met with the employees, company-wide, and let them know, let them understand, that this is an investment and not a sale of the bank — if the investment occurs.”

For a company that employs an estimated 488 in Alabama it was important it found investors who had a similar community banking philosophy, Lamar said.

“This investment will do nothing to change the way we operate, our philosophy or anything else,” Lamar said. “We’ve spent a good deal of time talking to different investors. I think it’s important you find someone who is congenial and thinks the way you do.”