Madison private investment group will recapitalize Anchor BanCorp

Madison-based Anchor BanCorp Wisconsin Inc. announced it has entered into agreements with Badger Anchor Holdings LLC, in which Badger Holdings will make up to a $400 million investment in Anchor.

Badger Holdings is a newly-formed entity organized by Badger Capital, LLC, a private investment group led by investment banking specialist Steven D. Hovde, who has long-time ties to Madison.

“The robust combination of Anchor’s strong brand, strategic branch network and leading mortgage origination platform present an attractive investment opportunity for us,” said Hovde. “We are pleased to be partnering with this well-established institution in what has historically been a stable Midwestern marketplace, and look forward to working together to build upon Anchor’s unique franchise.”

Pursuant to the agreements, Badger Holdings will purchase from Anchor up to 483.3 million shares of common stock at 60 cents per share. Badger Holdings also will provide Anchor with a term loan of $110 million, which will be convertible into shares of the company’s common stock at a conversion price of the lower of 60 cents per share or the market price at the time of conversion.

In connection with the transaction, the Anchor BanCorp also offer up to 166 million shares of common stock to its shareholders of record on Nov. 23, 2009, at a price of 60 cents per share.

Consummation of the transactions are subject to several conditions, including (1) resolution of Anchor’s outstanding loan from U.S. Bank and others in the aggregate principal amount of $116 million; (2) conversion into common stock of the shares of preferred stock and warrants issued to the U.S. Treasury pursuant to the TARP Capital Purchase Program at an acceptable conversion rate; (3) shareholder approval; (4) receipt of all required regulatory approvals; and (5) the absence of certain material adverse developments with respect to the company and its business.

Upon the completion of these transactions, assuming the maximum number of shares are purchased by Badger Holdings, current Anchor shareholders would own less than 5 percent of Anchor’s outstanding common shares, and Badger Holdings would own a majority. Badger Holdings will be registered as a savings and loan holding company.

“Completion of these agreements will provide Anchor with capital in excess of levels required of us by our regulators. It also preserves Anchor as an independent company that can continue our mission of being a viable and healthy community banking organization,” said David Omachinski, chairman of the AnchorBank and the company boards.

“We believe that this transaction is our best opportunity to return to profitability and growth,” said AnchorBank chief executive officer Chris Bauer. “This new capital will enable us to help our communities recover and prosper.”

Anchor BanCorp’s stock is traded on the NASDAQ exchange under the symbol ABCW. AnchorBank fsb, the wholly-owned subsidiary, has offices located in Wisconsin.

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