Ford at PCBC to mark closing of deal
“The money’s in the bank.”
That was the word from Texas billionaire Gerald Ford at the Aug. 31 announcement of the closing of a $500 million recapitalization deal with Pacific Capital Bancorp. It was Ford’s first public appearance regarding the deal, which leaves him with 86 percent of the tri-county region’s largest independent banking company.
The key points of the deal, as finalized Aug. 31, are:
• The Ford Financial Fund, Gerald Ford’s private equity firm, will own 86 percent of the firm.
• Shareholders of record on Aug. 30 will own 2 percent of the bank but are able to buy equity at the same 20-cents-a-share price as Ford, potentially owning up to 20 percent of the fully diluted bank.
• The U.S. Treasury will have a 12 percent ownership stake. The transaction translates the $180.6 million in Troubled Asset Relief Program funds the bank took on at the height of the financial crisis into preferred stock at a 37 percent exchange. Including $13.5 million in accrued dividends, the Treasury’s $194.1 million converts to about $71.8 million.
• It is anticipated that the preferred stock held by the Treasury will convert into common stock, with an initial conversion price of 20 cents per share.
Pacific Capital, the parent firm of Santa Barbara Bank & Trust and First Bank of San Luis Obispo, was placed under a consent order by federal regulators in May, telling it to shore up its capital levels or potentially be liquidated. The company had announced in April that the Ford Financial Fund planned to invest $500 million.
Pacific Capital executives were all smiles at the Aug. 31 news conference, held at the company’s headquarters in downtown Santa Barbara. They said that with more capital than they need flowing into the bank, they intend to use the firm as a platform for growth.
“We’re so excited about the prospects of this company going forward,” Ford said.
Upon the closing of the investment, Ford was named chairman of the board of directors of the Pacific Capital Bancorp holding company. Carl Webb, Ford’s business partner and a senior principal with Ford Financial Fund, is now CEO of both the bank and the holding company and chairman of the board of the bank.
George Leis, who was Pacific Capital’s CEO, moves to president and chief operating officer of the bank and its holding company.
Pacific Capital had $1.6 billion in cash and other unpledged liquid assets at the end of the second quarter, money that Leis has said the company will soon be ready to deploy. Webb has said he’s interested in using that cash to grow the bank’s brand, possibly into Ventura County.
Webb emphasized that Santa Barbara Bank & Trust will continue to be a locally operated and managed firm. “The decisions will be made right here,” he said.
Leis said Pacific Capital is getting back into the lending market and has hired a new credit team. The firm has also started talking to some of the hundreds of employees it has laid off in recent years and may resume hiring again, Leis said.
Webb told the Business Times in July that his company’s hunt for a bank to buy started seven years ago, but that there weren’t many candidates at first.
“For the first four years we didn’t have anything to look at. … We were on the sidelines,” he said. Then the financial crisis hit and “it came back to being our game again.”
Ford and Webb looked at dozens of banks around the country and bid on six others before deciding on Pacific Capital.
“We’re crazy about this bank,” Webb said in July. “This is a much better franchise than any others we’ve looked at.”
Ford and his team have a history of buying troubled banks and turning them around. He and his partners purchased their first bank in 1975 for $1.2 million and later sold it for $100 million. He made a fortune from the ashes of the savings and loan crisis, scooping up a handful of California banks to assemble Golden State Bancorp, the parent company of the CalFed system. He sold it to Citigroup in 2002 for $6 billion.
He now has grand plans to turn around Pacific Capital, a firm that lost $142 million in the first half of 2010.
“We have a heck of a lot of our own money in this deal and we want to see it work,” Ford said at the Aug. 31 news conference.
