Blue Valley TARP shares bought by hedge funds

10/23/2013 9:22 PM

10/23/2013 9:22 PM

Out-of-state investment funds bought most of the government’s shares in the Bank of Blue Valley’s parent company in a recent federal auction.

Bob Regnier, the bank’s founder and chief executive of Blue Valley Ban Corp., said half the shares went to two hedge funds represented by a man in California. He would not name the buyers but said none was in the Kansas City area.

“He was very nice,” Regnier said of the California man. “He said this was ‘a win’ — that’s his term, not mine — a win for them to get this TARP.”

The shares belonged to the U.S. Treasury, which got them for investing $21.75 million in Overland Park-based Blue Valley Ban Corp. under the government’s Troubled Asset Relief Program. Blue Valley was unable to repay the TARP funds, and the Treasury auctioned the shares.

Some were bought by Hildene Opportunities Fund II, managed by New York-based Hildene Capital Management, said Kevin Parks, a TARP analyst at Hildene.

Parks said Hildene owns some of the TARP shares at three other area banking companies: Blue Ridge Bancshares Inc. in Independence, which owns the Blue Ridge Bank and Trust, Citizens Bancshares Co. in Chillicothe, Mo., which owns the Citizens Bank & Trust, and Dickinson Financial Corp., which owns Armed Forces Bank and had owned Bank Midwest.

William Esry at Blue Ridge and Roger Arwood with Citizens declined to talk about the transactions. Dickinson officials could not be reached.

The Treasury had auctioned its TARP shares in those two banking companies previously, also because they had been unable to repay.

Other buyers of the local TARP shares have not been identified publicly.

The TARP shares give the new owners a limited role at the banking companies. For example, they come with no voting rights, which means the TARP shareholders have no voice in electing directors of the companies.

Control of the companies and their banks remains in the hands of their original owners.

In each case, however, the TARP buyers paid less than the Treasury had invested. Nor had the three banking companies paid all the dividends due the Treasury on its shares.

The new share owners, including Hildene, expect to collect at some point.

“This situation with Blue Valley, the underlying bank is more than well capitalized and eventually will take the steps necessary to cure those (missed dividend) payments,” Parks said.

Parks said others also evidently believe that about Blue Valley. Otherwise, he said, the Treasury’s stock would have sold for a larger discount than it did. Buyers paid 97.76 cents on the dollar for Blue Valley’s TARP.

TARP shares of Dickinson and Citizens sold for much bigger discounts, but Parks said he believed both of those companies’ banks had enough capital to eventually repay the unpaid dividends.

Blue Ridge has paid its dividends regularly since the Treasury auctioned its TARP shares, Park said, adding that it has “solid” capital levels and will redeem the shares eventually.

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