Billionaire banker buys Pacific Capital Bancorp

April 29, 2010

Gerald Ford

Billionaire banker Gerald Ford has agreed to buy a 91 percent interest in Pacific Capital Bancorp, the parent company of First Bank of San Luis Obispo and Santa Barbara Bank and Trust, for $500 million. [Rueters]

The company plans to sell 225 million shares at 20 cents a share to Ford’s private equity firm Ford Financial Fund. The offer is at a 95 percent discount to the stock’s Wednesday’s close of $4.11.

Shares of Pacific Capital Bancorp soared 35 percent in unusually heavy trading on Nov. 18 after the regions largest banking company announced they were seeking a buyer amid mounting losses that had caused federal regulators to require an agreement that the bancorp increase capital levels.

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What bugs me is the difference in reporting on this story. Compare the Tribune’s headline and story to CalCoast.

The Tribune uses more euphemisms and padded words than I knew existed…and they have to check in with Bob Wacker to see if the article is fit to print and if they need to add any clauses for him in the article.

The Trib has been putting out these bogus, cleverly worded press releases for local banks throughout this whole downturn. It really grinds my gears!

It isn’t only the bank’s that the Tribune does this with. They did it with Estate Financial and Hurst right up until the day that CalCoastNews broke the the truth to the public and informed the investors that they were all victims in a ponzi scheme.

Oh this is good.

Take a look at the recent trading volume, stock price action, and options on this pig. In the last 4 weeks volume surged 10 times normal, the stock price increased by around 280%, and while this was happening put option buying (betting on a decrease in stock price) skyrocketed to 56 times normal. Put buying is fifty six times normal just days before the stock takes a 57% haircut and is devalued 95%, causing the value of those put options contracts to surge in value by around 300%.

Is there any possibility that this is NOT insider trading?

Just another normal day of cream skimming and plundering by those who engage in zero actual economic activity or benefit whatsoever – traders, speculators, and bankers.

But don’t assume that Mr. Ford has come in and stolen a Zombie for pennies on the dollar and cut a fat hog just to take the prime cuts. He can still be wiped out of his entire $500M if the future doesn’t play out the way he anticipates and Sheila Bair’s Boys tap his institution to star in an episode of Bank Failure Friday.

This makes Martha Stewart look like she never had a “friend” in the world. I agree that this is obvious insider trading. I can understand why there was so much action on the puts (as the bank was notability in trouble) but the timing of the serge and then the grand finally sticks out like a club foot. Funny how they make an example of little miss perfect but seem to be oblivious to these “banksters” while they slide into home base. When is Obama going to nuke the SEC, build a big white collar jail house and restore some integrity to that ghetto we American’s call Wall Street?

Sad story — Shareholders must now consider selling for less than yesterday’s $4.18/share and as little as $.20/share because of the potential prospect of getting $0/share if the bank fails.

Summary here:

**Pacific Capital has struggled with $500 million in losses, driven by bad real estate loans, since the second quarter of last year.

**Pacific Capital’s bleeding continued this quarter with an $80 million loss that brought the bank’s tier-one leverage ratio — its capital divided by loans and other assets — to 4.6 percent. That figure is far short of the 9 percent regulators wanted to see late last year.

**the deal “represents the most attractive available alternative” given the bank’s losses, capital problems and mounting pressure from regulators.

What’s the catch? Why would stockholders sell for 20¢/share what they could have sold yesterday for $4.18/share? Something smells funny.

The article at the Reuters link also mentioned that the taxpayers’ portion, $188 million in TARP funds, only amounts to 7% of the company. (This compared to Ford’s 91% for $500 million).

The Reuters link also mentions $455 million new ‘preferred’ shares being created and sold as part of the deal.

I absolutely do not know what to make of this.

Little help, anyone ???