Troubled TARP bank guards against takeover

Beleaguered TARP recipient Anchor BanCorp Wisconsin Inc., which received $110 million in government aid in January 2009, announced that it has a new shareholder rights plan designed to prevent an unwanted change in ownership.

The plan's purpose is to protect the company's ability to use its tax assets -- in this case losses that could offset future taxable income -- according to a company announcement.

Anchor BancCorp is the holding company for AnchorBank FSB, which has 57 offices in Wisconsin and is the state's fourth largest bank.

If the company's ownership changed, its ability to make use of past losses would be limited. Generally, under tax law, an ownership change could occur if the company's "five percent shareholders" collectively increased their ownership by more than 50 points over a three-year period.

Under the plan, the company declared a dividend of one preferred share purchase right for each oustanding common share. The rights would be distributed as of Nov. 22 but would be activated only if the plan is triggered.

"Strategically, this plan is designed to safeguard considerable tax attributes embedded in the company by reducing the likelihood of an unintended 'ownership change' through any third party actions involving Anchor common stock," Chief Executive Chris Bauer said in a statement. "This is a critical aspect of preserving the value of Anchor as it seeks to raise capital."

The bank is, however, trying to raise additional capital and would consider an investor who would take a majority stake, Anchor Bank's president, Mark Timmerman, told The Business Journal of Milwaukee.

The shareholder rights plan would make the company more attractive to a new investor by preserving the status of the tax-deferred assets.

The company also announced some positive news in its most quarterly report. It had a $1.2 million loss for the period ending Sept. 30 - a vast improvement over the $78.4 million loss in posted in the same quarter last year.

The bank also announced that it improved its total risk-based capital ratio and is now considered "adequately capitalized" by regulators.

But the bank remains in poor shape.

It has a lowest-possible "0" rating from independent banking analysts BauerFinancial, and the Treasury Department now has the right to appoint two directors to Anchor's board after it failed to pay $8.5 million in quarterly dividends it owes taxpayers as a condition of receiving aid through the Troubled Asset Relief Program..

Earlier this year, Anchor's own accounting firm "expressed substantial doubt" about the company's ability to continue, according to its most recent annual report.

Last year, investors attempted to put $400 million into Anchor, but the bank's other lenders reportedly objected to the terms of the deal.

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