LORIS, S.C.–(GLOBE NEWSWIRE)–HCSB Financial Corporation (OTCPK:HCFB) (the “Company”) announced today that it has entered into a stock purchase agreement with Castle Creek Capital Partners VI, L.P. and certain other institutional and accredited investors, pursuant to which it expects to raise aggregate gross proceeds of $45 million through a private placement of shares of common stock at $0.10 per share and shares of a new series of non-voting mandatorily convertible non-cumulative preferred stock at $10.00 per share. The closing of the private placement is subject to regulatory approval and other conditions.
Upon closing of the private placement and receipt of regulatory approvals, Castle Creek will, and one or more other investors may, be entitled to have one representative appointed to both the Company’s and Bank’s (as defined below) board of directors, and one or more other investors may be entitled to have a non-voting board observer.
The Company intends to use the net proceeds of the private placement to repurchase the Company’s outstanding Series T preferred stock, trust preferred securities, and subordinated debt notes, as described below, and to recapitalize the Company’s wholly-owned bank subsidiary, Horry County State Bank (the “Bank”) to support its operations and increase its capital ratios to meet the higher minimum capital ratios required under the terms of the Bank’s consent order with the FDIC and the South Carolina Board of Financial Institutions.
The Company also announced that it has entered into an agreement with the U.S. Treasury to repurchase its outstanding Series T preferred stock, which were issued as part of the TARP Capital Purchase Program, at a 99% discount and an agreement with the holder of its trust preferred securities to repurchase those securities at a 90% discount. In addition, the Company announced that on March 2, 2016, it received final court approval of the settlement of a class action lawsuit that had been brought by holders of its subordinated debt notes. Pursuant to the settlement, the Company will pay each class member an amount equal to 20% of the principal of such person’s subordinated debt note. In exchange, class members will grant all defendants in the lawsuit a full and complete release of all claims that were asserted or could have been asserted in the class action lawsuit. The Company is settling the class action solely to avoid future inconvenience and protracted, costly litigation and to help facilitate the recapitalization of the Bank, and the settlement does not constitute a concession or admission of wrongdoing or liability by any of the defendants.
The Company must still receive the necessary regulatory approvals or nonobjections for each of these agreements and payments. Assuming it receives these approvals, it anticipates closing the recapitalization in April 2016.