Broadway Financial Corporation (the “Company”) (NASDAQ Capital Market:
BYFC), parent of Broadway Federal Bank, f.s.b. (the “Bank”), today
reported that it has completed its previously announced plan to
recapitalize (the “Recapitalization”) its balance sheet, which resulted
in an increase of approximately $27.81 million in the Company’s equity
attributable to common stock.
As part of the Recapitalization the Company exchanged common stock
equivalents with an aggregate value of approximately $11.42 million for
all of the Company’s formerly outstanding preferred stock (the
“Preferred Stock Exchanges”), including the Series D and E Fixed Rate
Cumulative Perpetual Preferred Stock held by the United States
Department of the Treasury (the “U.S. Treasury”) and the associated
accumulated but unpaid dividends thereon. The Preferred Stock Exchanges
were completed at 50% of the aggregate liquidation preferences of the
preferred stock, totaling $17.55 million, and 100% of the accumulated
dividends of approximately $2.65 million.
In addition, the Company raised approximately $4.24 million of new
equity capital through the sale of common stock at a price of $1.00 per
share (the “Private Placement”) to six institutional investors, led by
an entity affiliated with Gapstow Capital Partners. The other investors
included both new and current stockholders. This capital is in addition
to the $200,000 of aggregate common stock sold to directors and officers
in July and November 2012.
Also as part of the Recapitalization, the Company exchanged common stock
equivalents with a value of approximately $2.57 million for a portion of
its senior bank debt. As a result, the Company’s senior debt was reduced
by $2.57 million, from $5.0 million to approximately $2.43 million.
The Company entered into a modified loan agreement for the remaining
senior debt that provides for quarterly payments of interest only for
the next 18 months, and monthly payments of principal and interest to
final maturity in February 2019. In addition, the senior lender forgave
the accrued but unpaid interest on the entire amount of the original
loan, which will be reported as a pre-tax gain of approximately $1.75
million in the Company’s third quarter.
The combination of the Preferred Stock Exchanges, the Private Placement,
and the transactions related to the Company’s senior debt exchange
increased the book value of the Company’s common equity by approximately
$27.81 million, and increased the number of shares of common stock and
common stock equivalents by approximately 18.23 million shares, which
represents approximately 90.48% of the total number of pro forma shares
of common stock. The Recapitalization also increased the Company’s pro
forma book value to $1.35 per share of common stock as of June 30, 2013,
and based on the assumed uses of proceeds, increased the Bank’s pro
forma Tier 1 Leverage ratio to 9.99%, its pro forma Tier 1 Risk-Based
Capital ratio to 15.86%, and its pro forma Total Risk-Based Capital
ratio to 17.15% as of June 30, 2013.
The common stock equivalents issued in the Recapitalization consist of
two new series of non-cumulative preferred stock, Series F Common Stock
Equivalents and Series G Non-Voting Preferred Stock. The Series F Common
Stock Equivalents are mandatorily convertible into new common stock if
the stockholders of the Company approve the authorization of additional
shares of common stock at a special meeting (the “Special Meeting”) that
the Company intends to call in the near future, and the Series G
Non-Voting Preferred Stock will be mandatorily convertible into new
non-voting common stock if the stockholders of the Company approve the
creation of a new series of non-voting common stock at the Special
Meeting. After the mandatory conversions, the Company’s only outstanding
equity securities will be common stock and non-voting common stock.
Chief Executive Officer, Wayne-Kent Bradshaw, stated, “Consummation of
the Recapitalization represents a major milestone in our overall plan to
return the Company to a healthy financial position capable of producing
profitable growth for our investors. We are especially pleased that we
were able to obtain investments from strong, new investors, such as
Gapstow Capital Partners, VEDC, Economic Resources Corporation, and the
California Community Foundation, which support our mission of serving
low-to-moderate income communities in Southern California. In addition,
we are thankful for the support of existing stockholders, such as the
National Community Investment Fund, which participated in the
Recapitalization. In the near term we will accelerate our efforts to
improve operations and pursue growth, implement other steps of our
overall capital plan, and continue our efforts to remove the
restrictions under our Cease and Desist Orders.”
Jack Thompson, Head of Financial Institutions Investments of Gapstow
Capital Partners, commented, “We are proud to help Broadway Financial
recapitalize so they can continue making loans to foster local
businesses. Gapstow Capital Partners has invested in a number of
community banks that, like Broadway Financial, are the lifeblood of
their communities. We believe that their health is a vital component of
the overall economic recovery in the U.S.”
Paul Hughes of BlackTorch Capital served as financial advisor to the
Company.
Arnold & Porter, LLP served as legal advisor to the Company.
Additional information regarding the transactions comprising the
Recapitalization will be provided in the Form 8-K Current Report that
the Company will file in the next few days.
About Broadway Financial Corporation
Broadway Financial Corporation conducts its operations through its
wholly-owned subsidiary, Broadway Federal Bank, f.s.b., which is the
leading community-oriented savings bank in Southern California serving
low to moderate income communities. We offer a variety of residential
and commercial real estate loan products for consumers, businesses, and
non-profit organizations, other loan products, and a variety of deposit
products, including checking, savings and money market accounts,
certificates of deposits and retirement accounts. The Bank operates
three full service branches, two in the city of Los Angeles, and one
located in the nearby city of Inglewood, California.
Information about the Company may be obtained by writing to: Broadway
Financial Corporation, Investor Relations, 5055 Wilshire Blvd., Suite
500, Los Angeles, CA 90036, or by visiting our website at www.broadwayfederalbank.com.
About Gapstow Capital Partners
Gapstow Capital Partners (“Gapstow”) is an investment firm, based in New
York City, focused on identifying investment opportunities in the credit
markets and banking industry. Gapstow was founded in 2009 and has over
$800 million in assets. Gapstow manages a number of specialized
portfolios, including one that makes direct equity investments in small
community banks across the United States. Please refer to www.gapstow.com
for more information.
About VEDC
VEDC is the largest non-profit small business lender in California
offering direct micro and small business loans through a number of
programs, including SBA Community Advantage and SBA 504 loans. As a
national small business lender, VEDC lends $25 million annually, while
providing direct business assistance services to more than 4,000
businesses. With eight offices nationwide VEDC has supported the small
business owner for 37 years with the goal of creating and sustaining
jobs and businesses in under-served communities. For more information
please visit www.vedc.org.
About Economic Resources Corporation
Economic Resources Corporation (“ERC”) is a California nonprofit
corporation formed to bring capital, expertise and opportunity to
underserved communities through business development and investment.
Established in 1968, ERC was created by community, business and
professional leaders to address the widespread disparity in economic
opportunity, productivity and wealth creation in underserved
communities, and to pursue activities to help mitigate the economic
barriers for effective local development. ERC promotes economic growth
and increases job opportunities in underserved communities by supporting
business development, investing in commercial and industrial real estate
and stimulating the revitalization of economically disadvantaged
communities.
About California Community Foundation
California Community Foundation (the “Foundation”) is a tax-exempt
public non-profit organization focused on strengthening communities
within Los Angeles County through philanthropic activities and civic
engagement. The Foundation supports and encourages charitable giving and
manages more than 1,600 charitable funds and foundations that, among
other things, enhance community development, promote health and
wellness, preserve the environment, assist aging adults, fund
scholarships and support the arts. The Foundation was created in 1915 by
the former Chief Executive Officer of Security Pacific Bank.
About National Community Investment Fund
National Community Investment Fund (“NCIF”) is a non-profit private
equity trust that invests in banks, thrifts and credit unions that
generate both financial and social returns. NCIF's has total assets
under management of $195 million including $173 million of New Markets
Tax Credits. NCIF is the largest investor in mission-oriented CDFI banks
that are focused on underserved and particularly on low-to-moderate
income communities that may be located in urban, rural or Native
American markets, and may be minority-owned or minority-focused. Since
its inception in 1996, NCIF has invested over $34.4 million in 55
financial institutions nationwide.
This press release contains forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. These
forward-looking statements are based upon our management’s current
expectations, and involve risks and uncertainties. Actual results or
performance may differ materially from those suggested, expressed, or
implied by the forward-looking statements due to a wide range of factors
including, but not limited to, the general business environment, the
real estate market, competitive conditions in the business and
geographic areas in which the Company conducts its business, regulatory
actions or changes and other risks detailed in the Company’s reports
filed with the Securities and Exchange Commission, including the
Company’s Annual Reports on Form 10-K and Quarterly Reports on Form
10-Q. The Company undertakes no obligation to publicly revise any
forward-looking statement to reflect any future events or circumstances,
except to the extent required by law.
Copyright Business Wire 2013