New capital for Anchor BanCorp Wisconsin
MADISON-- A group of investors has agreed to recapitalize the struggling Anchor BanCorp Wisconsin, breathing new life into a company that hasn't posted a profit in the last five fiscal years.
Institutional and private investors from across the country have agreed to provide $175 million in new capital for Anchor BanCorp, the parent of the nearly century-old AnchorBank of Madison.
AnchorBank has branches in Delavan and Lake Geneva.
Anchor BanCorp, in turn, has filed for Chapter 11 reorganization in the Western District of U.S. Bankruptcy Court and will pay its major creditors much less than they are owed.
The holding company owes $183 million to a group of lenders led by U.S. Bank and $139 million to the U.S. Treasury from funds it obtained in 2009 through the Troubled Asset Relief Program, or TARP.
If the bankruptcy judge and the Federal Reserve Bank agree, Anchor will pay the U.S. Bank group $49 million to settle its debt and will give the Treasury Department 3.3 percent of the stock in the reorganized company, valued at about $6 million.
The reorganization and new capital will give the bank the opportunity to become a significant lender once again, said bank president Chris Bauer.
"At the end of the day, the bank will have been saved, it will save 700 jobs, and will allow us to pump a lot of new capital into the economy here," Bauer said.
Bauer stressed that AnchorBank isn't filing for Chapter 11 under the federal bankruptcy law, just the parent company. The bank will continue operating as normal, he said.
Anchor was founded in 1919 and fell into financial trouble about five years ago due to commercial loans that soured as the economy tanked.
The current Anchor BanCorp shareholders, whose investments actually diminished years ago, end up with nothing. Their shares will be eliminated as part of the restructuring.
Anchor will register to resume public trading with new shares when it emerges from bankruptcy, which could take an additional 90 days to complete, Bauer said.