Anchor BanCorp files for ‘pre-packaged’ Chapter 11 reorganization, 100 percent of necessary equity financing already committed
It’s a new lease on life for AnchorBank and its parent company, Anchor BanCorp Wisconsin.
A group of institutional and private investors from all over the U.S. agreed to put $175 million into Anchor BanCorp in a deal that will pump new money into the struggling company, get it out from under its mountain of debt, and maintain the identity of the nearly century-old Madison bank. The company has a branch office in Prairie du Chien.
“I think this is a very exciting time for Anchor Bank,” said Chris Bauer, president and chief executive. “We’ve found investors from all over who will help us bring $175 million in new capital to the state, which we will turn around and make loans and community investments. I think this makes a great statement about the great markets we’re in. It feels good to be able to give back to communities like Prairie du Chien.”
According to Bauer, Anchor BanCorp’s struggle began four years ago, near the end of 2008 and in early 2009 when the housing and stock markets collapsed. He said the company really began to tumble when its large commercial real estate loans failed.
As part of this recent arrangement, Anchor BanCorp filed for a prepackaged, Chapter 11 bankruptcy reorganization in U.S. Bankruptcy Court for the Western District of Wisconsin, in Madison, late Monday night.
The holding company owes $183 million for a 2008 loan from a group of lenders led by U.S. Bank and $139 million to the U.S. Treasury from funds obtained in 2009 through the Troubled Asset Relief Program.
If approved by the bankruptcy judge and the Federal Reserve Bank, Anchor will pay the U.S. Bank group $49 million to settle that debt and will give the Treasury Department 3.3 percent of the stock in the reorganized bank company,
valued at about $6 million. Bauer said Treasury officials have agreed to the terms and so have the holders of 84 percent of the debt to the bank group.
“Chapter 11 is a tool to get this done quickly,” Bauer said, noting that the judge agreed Tuesday morning to plan a transaction confirmation hearing for Aug. 30.
He said business at the bank is being conducted as usual. Customers will not be affected, and none of Anchor’s 700 employees will lose their jobs as a result of the transactions.
“It doesn’t impact the customer. It’s a positive thing for our customers,” Bauer said.
Shareholders will lose their stake, as Anchor’s current stock will no longer exist after the bankruptcy is approved by the court, a process that is expected to take 45 to 90 days, Bauer said.
Anchor will register to resume public trading with new shares when it emerges from bankruptcy, which could take an additional 90 days to complete, Bauer said.
He also explained that Anchor has been very transparent for years and that shareholders have been aware of the diminishing stock since it fell below $1 per share four years ago.
Bauer said when the reorganization is complete, $110 million will be invested in the bank, doubling its capitalization. AnchorBank will add staff—about 70 employees over the next two years—as well as offer new services and invest in its systems and properties, he said.