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A group of investment firms has forced American Bancorp. into liquidation over unpaid trust-preferred debt. Creditors have threatened to go this route before but this is the first time any have followed through, serving as an ominous precedent for the up to 300 banks in danger of defaulting on the hybrid securities.
June 2 -
Bidding is over in the first bankruptcy auction to be held at the demand of trust-preferred creditors, but there's no clear winner.
December 12 -
A Minnesota community bank has made an offer to buy American Bank of St. Paul in what would be the first time a bank was forced into a sale over unpaid trust-preferred debt.
October 24
A judge has named Deerwood Bank winner of the bankruptcy auction for American Bank of St. Paul, in the first test of involuntary bankruptcy as a means of resolving trust-preferred debt.
The $250 million-asset Deerwood, Minn., lender bid $17 million for the $302 million-asset American Bank, according to court documents. Judge Katherine Constantine of the U.S. bankruptcy court for Minnesota approved Deerwood's bid on Tuesday, overruling an
American Bank's parent, American Bancorp, was
The price Deerwood ultimately pays will be affected by loan-loss calculations at the time of the sale, documents show. American Bancorp's loan-servicing subsidiary, AmeriNational Community Services, will be sold to a company called OSP, LLC, for $15.2 million.
The runner-up bidder for American Bank was the $175 million-asset Premier Bank Minnesota in Farmington. University Financial submitted the highest bid to buy American and the loan-servicer together. University argued that it should be named the auction winner, despite its slightly lower bid, because closing a single transaction would be easier and cheaper than closing two, among other reasons.
American Bank of St. Paul earned $2.9 million through September and has seven branches, according to the Federal Deposit Insurance Corp.
While American is so far the only holding company to involuntarily liquidate over trust-preferred debt, FMB Bancshares in Georgia could be next. FMB's creditors filed for involuntary bankruptcy in June, but the $566 million-asset lender objected, arguing that the creditors have no right to force liquidation. The judge ruled in the creditors' favor, but FMB has not been ordered to liquidate.
