Activists Still Hope to Have Say in Bank Merger

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San Francisco community activist organization California Reinvestment Coalition and a host of other advocacy groups spent the better part of a year protesting the merger of Pasadena’s OneWest Bank and CIT Group Inc., of Livingston, N.J. So when regulators signed off on the deal July 21, it was natural the group’s leaders would feel a certain amount of frustration.

But CRC Executive Director Paulina Gonzalez said she’s encouraged by the conditional approval regulators gave the deal – which is contingent on the bank submitting an improved Community Reinvestment Act plan. Regulators must review a bank’s compliance with that 1977 law before approving a transaction.

Gonzalez also hinted at the next phase of her strategy, which has her taking cues from a recent deal in New Jersey.

She drew a parallel between the OneWest situation and the Office of the Comptroller of the Currency’s conditional approval in October of the acquisition of Boca Raton, Fla., lender 1st United Bank by Valley National Bank of Passaic, N.J., another bank merger that inspired significant pushback from community groups.

In that case, the OCC required Valley National to beef up its CRA plan and make it public in order to get approval. As a result, Valley National extended an olive branch and sought input from many of the same advocacy groups that initially stood against its acquisition deal.

“They worked with groups that initially opposed the plan,” Gonzalez said. “That’s a model for OneWest. We’re ready to work with OneWest.”

While Gonzalez said she was looking forward to resetting relations and sitting down with the banks to bolster their CRA plan, some other opponents are pursuing less traditional means of stopping the merger.

A GoFundMe crowdfunding account started by James Beekman – which is titled “stopcorruptbank” – is seeking online donations to put a halt to the CIT-OneWest deal. As of press time, the account had raised just $65 toward its goal of $200,000.

Gonzalez is going with a more collegial approach.

“We’re engaging with our members, and over the next 90 days were hopeful this process will be an inclusive one,” she said.

Rare Yields

Appetizing yields on fixed-income investments are hard to come by in today’s environment. But downtown L.A. money manager Oaktree Capital Management found the best returns of last year by lending to a fledgling rare-earths company.

Last year, Oaktree agreed to provide up to $400 million in rescue financing – at an interest rate of 12 percent – to rare-earth miner Molycorp Inc. of Greenwood Village, Colo. It was the highest rate on a major loan made in the United States last year, according to data from Bloomberg. The loan also included aggressive covenants aimed at protecting Oaktree in the event Molycorp filed for bankruptcy, which it did in June.

While other creditors, including New York’s Apollo Global Management, will take a hefty haircut, Oaktree was able to secure a senior position, and its high-interest loan will remain untouched. In addition, Oaktree took advantage of its leverage to take another bite of the apple – or cerium ore, in this case – by funding Molycorp while it goes through bankruptcy proceedings.

The money manager got court approval July 23 to provide $130 million in debtor-in-possession financing to Molycorp. The interest rate was not disclosed, but it’s likely to be comparably steep.

Molycorp owns the Mountain Pass mine in the desert of San Bernardino County, a notable waypoint on the L.A.-to-Las Vegas drive, which supplied most of the world’s rare-earth elements between the 1960s and ’80s, before China took control of the market. Rare earths have a wide range of applications, and are used to make vital parts of products from smartphone processors to missiles.

Molycorp bought the mine in 2008 and has faced an uphill climb trying to bring it back to full production while dealing with the headwind of declining rare-earth prices.

The other noteholders were interested in providing $225 million in bankruptcy financing of their own, but they wanted their new loans secured by liens on Molycorp’s profitable offshore operations. Oaktree had said those terms would have subordinated its first-lien claims on those offshore operations, and a bankruptcy judge agreed.

C-Suite News

Alan Rothenberg, chairman of Century City’s 1st Century Bank, was honored last week as the first and namesake recipient of Major League Soccer’s Alan I. Rothenberg Legacy Award at the league’s all-star game in Commerce City, Colo. The award will be presented annually to someone who has made an impact on the league. Rothenberg spent eight years as president of the United States Soccer Federation. … Accounting giant Ernst & Young has promoted six people in its L.A. office. Sudarshan Jain, Sesilia Song, Michelle D. Albert and Mitch Paull were named partners; Stacy Mines principal and Ramon Reynoso executive director. … Mid-City real estate peer-to-peer lender AssetAvenue has named Peter Coleman chief investment officer. He was previously with Loyal3 Holdings in San Francisco.

Staff reporter Matt Pressberg can be reached at [email protected] or (323) 549-5225, ext. 230.

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