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Pacific Capital Bancorp Finalizes $500 Million Investment Deal
By Ray Estrada, Noozhawk Business Columnist | 
| Published on 08.31.2010
The parent company of Santa Barbara Bank & Trust will continue to be “locally run and managed,” the men whose company has pumped $500 million into Pacific Capital Bancorp pledged Tuesday during a news conference at Pacific Capital’s Anacapa Street headquarters in downtown Santa Barbara.
The U.S. Department of the Treasury has agreed to allow Pacific Capital Bancorp to pay back only a portion of the more than $181 million given to Pacific Capital through the Troubled Asset Relief Program, or TARP, about two years ago when bad real estate loans almost brought down the region’s largest bank holding company, valued today at $7.1 billion.
“We don’t plan any significant changes. … It will be seamless,” said Carl Webb, senior principal with Ford Financial Fund, who on Tuesday was appointed chief executive officer, chairman of the board and CEO of the bank. “It will still be locally owned, it will be locally managed. … Decisions won’t be made in San Francisco.”
George Leis, who formerly was the company’s president and CEO, was appointed president and chief operating officer of the company and bank.
Texas billionaire Gerald Ford said his firm haggled with the Treasury Department to allow Pacific Capital to pay back only part of the TARP funds.
“The Treasury took a 63 percent discount on $181 million,” Webb said. “In addition to that, the Treasury today becomes an owner of roughly 12 percent of this company. So, the ownership is Ford Financial Fund, the U.S. Treasury and the existing shareholders.”
That means Ford owns 86 percent of the company, and private stockholders make up only about 2 percent. Ford had sought to acquire 91 percent of the stock.
As for Pacific Capital’s bad loans that put Pacific Capital in hot water, Webb said the company doesn’t plan to sell them in bulk, but “we will work through them.”
Ford added: “We really like California because of our success in the 1990s.”
During the 1980s and 1990s, Ford and New York billionaire Ronald Perelman acquired many thrifts. In 2002, they obtained Golden State Bancorp, a California-based savings and loan. That same year, Citigroup Inc. acquired Golden State from Ford and Perelman for about $5.3 billion. Ford owns Citi shares worth $1.1 billion.
Ford’s other investments include auto finance companies AmeriCredit and Triad Financial, and McMoran Exploration, which deals with oil and natural gas. A Southern Methodist University graduate, Ford donated $20 million in 1997 to build the new SMU football stadium, which now bears his name. He said Tuesday that he and Pacific Capital have no plans to invest in South Coast football stadiums.
Leis said the bank will begin to make more loans “in several months” and may even hire back some employees who have been laid off during the past two years.
Since 2008, the company has lost more than 325 of its 1,664 full-time employees and cut retiree benefits. A first-quarter net loss for the bank of $72.6 million followed a 2009 net loss of $405 million, as loan losses mounted.
Earlier this month, Pacific Capital announced a net loss of $61 million, or $1.24 per share, for the second quarter of 2010, compared with a net loss of $362.6 million, or $7.80 per share, for the same period a year ago.
On Tuesday morning, federal officials again refused to comment on the deal, even though they earlier required Pacific Capital to submit a capital plan by Sept. 8. Regulators said if the bank couldn’t meet the minimum capital ratios, Pacific Capital’s board of directors must submit a proposal to sell or merge the bank or liquidate it.
Ford said regulators don’t usually comment on these types of deals, but he expects to be talking to them again soon to iron out all of the remaining issues.
Edward Birch, a member of the company’s board since 1983 and chairman of the board since April 2004, will continue to serve on the board with the title of “chairman emeritus.”
Pacific Capital must get written approval from regulators before it or its subsidiaries issue, increase or guarantee debt. The company must do the same before issuing dividends.
— Noozhawk business writer Ray Estrada can be reached at .(JavaScript must be enabled to view this email address).
Comments
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» on 08.31.10 @ 08:48 PM
This article is misleading.
Do they have to pay back 63% of the note or 37%?
‘“The Treasury took a 63 percent discount on $181 million,” Webb said.’
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» on 08.31.10 @ 09:51 PM
I cant believe that the treasury government is allowing anyone to not pay back the money that is owed to tax payers. One more reason to never allow government to throw money at companies and frankly not to trust banks that have taken TARP money and have not paid back or are paying back the money.
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» on 09.01.10 @ 08:17 AM
What do you know? Old white guys in suits running a bank into the ground and having the taxpayers bail them out. Let me guess - they live in Montecito or Hope Ranch? How shocking.
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» on 09.01.10 @ 08:33 AM
I just KNEW that old white guy in a suit, Maxine Waters, lived in Hope Ranch.
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