Anchor Bank does not have enough cash to repay loan from U.S. Bank
Madison-based Anchor Bancorp Wisconsin Inc., the parent company of Anchor Bank, is facing a March 2 deadline to repay $56.3 million of a $116.3 million revolving line of credit to U.S. Bancorp, the Minneapolis-based corporate parent of U.S. Bank.
However, according to Anchor’s Feb. 17 filings with the U.S. Securities & Exchange Commission (SEC), Anchor Bank does not have sufficient cash on hand to make the payment and will not likely be able to raise enough to pay it.
"As of the date of this filing, we do not have sufficient cash on hand to reduce our outstanding borrowings to $60 million," the filing stated. "There can be no assurance that we will be able to raise sufficient cash on hand to reduce the borrowings to $60 million prior to March 2, 2009."
The balance of the loan, issued on June 9, 2008, is due on Dec. 31, 2009, and there is no commitment within the loan agreement for renegotiation. If Anchor Bancorp is unable to repay the balance of the loan and U.S. Bancorp is unwilling to renegotiate its terms, U.S. Bancorp could foreclose on Anchor Bancorp.
"If we fail to meet our payment obligations under the credit agreement, such failure will constitute an event of default under the credit agreement," the SEC filing states.
Anchor is the fourth-largest Wisconsin-based bank.
In the event of a default, U.S Bancorp could decide not to allow Anchor Bancorp to borrow further, could terminate its outstanding commitment or could seize outstanding shares of Anchor’s stock that have been pledged as capital under the loan.
"If the agent (U.S. Bancorp) were to take one or more of these actions, it could have a material adverse effect on our reputation, operations and ability to continue as a going concern, and you could lose your investment in the securities," the filing stated.
Mark Timmerman, president and chief executive officer of Anchor Bank, told BizTimes Milwaukee that his bank is in active negotiations with U.S. Bancorp.
"We are well along in active negotiations with U.S. Bank to reach an agreement on an amendment (to the line of credit)," Timmerman said. "We are expecting a proposal in the near future. We believe we’re making progress. At this point, we’re well capitalized and not in default. These (negotiations) are occurring and I imagine will continue to occur on a very active time frame. We want to get this resolved – all parties want to get this resolved."
A U.S. Bancorp spokesman declined to comment on the matter.
In its filing with the SEC, Anchor Bancorp reported a loss of $167.3 million during the fourth quarter of 2008, including $60.3 million in loan losses. The bank had $6.3 million in net income during the same quarter of 2007.
Anchor Bancorp had about $4.8 billion in total assets at the end of the fourth quarter.
Anchor Bancorp sold $110 million in its senior preferred stock shares to the U.S. Treasury under the federal Troubled Asset Relief Program (TARP) on Jan. 30.
Customers of Anchor Bank are covered by the Federal Deposit Insurance Corp. insurance up to $250,000, regardless of what becomes of the bank.