$50 Million Rescue Falls Through For U.S. Century Bank
A plan to prop up a struggling Doral-based bank appears to have been thwarted by an unexpected and unlikely factor: Miami's fledging real estate boom.
U.S. Century Bank received $50.2 million in federal Troubled Asset Relief Program bailout money in 2009 but has since suffered significant losses. The bank said Wednesday that a deal led by local real estate investors to buy a 75 percent stake in the bank has been scrapped.
The transaction, inked in April, would have seen developers Jimmy Tate and Sergio Rok partner with other South Florida businessmen to inject $50 million into the bank. The investment was considered a must for U.S. Century, which is designated undercapitalized by federal regulators.
After a twice-delayed deadline to close the deal expired Dec. 31, the investor group decided to walk away rather than negotiate another closing date.
Various players in the scuttled transaction presented notably different versions of why the agreement fell through. But both noted a desire to capitalize on Miami's frothy real estate investment landscape played a role in creating irreconcilable differences.
'Balls In The Air'
Carlos Davila, U.S. Century's chief executive, said it was mostly "deal fatigue" by investors inexperienced with the dynamics of dealing with heavily regulated financial institutions that ultimately killed the transaction. In particular, Davila said the investors were unwilling to wait out the drawn-out approval process of regulators vetting the proposed sale.
U.S. Century, which has $1 billion in assets, has been operating under enhanced oversight by the Federal Deposit Insurance Corp. since 2011 under a consent order the bank accepted that year.
"We'd been pending approval from the FDIC for six months," Davila said. "For a group of investors that hasn't been in the business of buying a bank historically, six months can look like a very long time."
Tate, who had been leading the scuttled deal, disputed that characterization, noting the long timeline and various extensions were not necessarily what caused the agreement to collapse. More to blame was what investors had seen inside the bank during due diligence.
"There were a lot of balls in the air, unresolved issues," Tate said, "As a condition to close, certain thresholds needed to be met, and other issues needed to be solved. I think the board kept trying to extend [the closing deadline] for a period of time to see if the issues were resolved. But collectively we realized there was no way that would happen within a short period of time."