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V.I. Community Bank Sale Two Steps Closer to Reality

Jan. 9, 2007 — The U.S. Bankruptcy Court Wednesday entered an order approving sale of the V.I. Community Bank to FirstBank of Puerto Rico for $3 million. The V.I. Banking Board met and approved the transfer as well, making the day a major milestone on the road toward final sale and actual transfer of ownership of the bank.
Cassan Pancham, FirstBank's executive vice president, Eastern Caribbean Region, is overseeing the acquisition. Pancham said Wednesday by phone the Federal Deposit Insurance Corporation (FDIC) and the Office of the Commissioner of Financial Institutions of Puerto Rico must still give their blessing. FirstBank is making plans to incorporate VICB's three branches with First Bank's existing 13 branches in a merger transaction, Pancham said.
James Carroll, Prosser's court-appointed Chapter 7 bankruptcy trustee, told the Source these developments are a positive step, showing that the bank transfer is going smoothly and all is well.
"It is an important day for us," Carroll said. "It's all moving according to schedule, and we anticipate FDIC approval by the end of the month. They determine that, of course, but obviously the FDIC is very much in favor of this and has been nothing but very helpful in this process."
The VICB is part of the estate of Jeffrey Prosser, former owner of Vitelco, the Daily News, Innovative Cable and other local companies. The bank, with three branches on St. Croix, is being sold as part of ongoing liquidation of Prosser's assets. Prosser is in involuntary Chapter 7 bankruptcy and ICC — parent company to Vitelco, Innovative Cable, TV Channel 2 and other local companies — is in Chapter 11. Vitelco is solvent and not in bankruptcy.
FirstBank Puerto Rico is a state-chartered commercial bank with operations in Puerto Rico, the Virgin Islands and Florida. It is in turn owned by First BanCorp. Other First BanCorp properties include FirstBank Insurance Agency and Ponce General Corporation. FirstBank operates a total of 153 financial-services facilities throughout Puerto Rico, the U.S. and British Virgin Islands, and Florida. Among the subsidiaries of FirstBank Puerto Rico are Money Express, a finance company; First Leasing and Car Rental, a car and truck rental leasing company; and FirstMortgage, a mortgage origination company. In the U.S. Virgin Islands, FirstBank operates First Insurance V.I., an insurance agency, and First Express, a small loan company.
Carroll is selling off Prosser's assets to pay his debtors. The trustee filed a motion Dec. 3 with U.S. Bankruptcy Judge Judith Fitzgerald to sell Prosser's 10,000 shares in the bank. Another 80 shares — not enough to affect ownership — are in other hands. Fitzgerald approved the sale Dec. 11, notice was issued Dec. 13, and bids were submitted by Dec. 20. First Bank's bid, the only qualifying one, was selected Dec. 27. Fitzgerald approved the sale Jan. 3, but the order was officially entered Wednesday.
The V.I. director of Banking and Insurance confirmed by phone the banking board met Wednesday morning, as well, and approved the transfer.
FirstBank bid $3 million cash up front "plus any or all interest collected on the promissory notes which may be executed between VICB and the non-debtor subsidiaries of ICC," according to court documents.
An FDIC investigation into the VICB was triggered in October. At that time, ICC Chapter 11 trustee Stan Springel reported that $4 million worth of checks from Vitelco and other Prosser-owned ICC subsidiaries were presented to and cleared by the Prosser-owned bank, even though the checking accounts lacked funds to cover them. A repayment plan has been established. The promissory notes mentioned in the bid and the court order refer to that repayment plan. So while FirstBank is paying roughly $3 million, the Prosser estate will also receive funds from payment of those promissory notes.
FirstBank's bid is for a bank with at least $58 million in deposits. If the actual deposits are less than that upon transfer, for each $1 million it is short of that amount the price is lowered by $152,600.
A 10-percent deposit, $300,000, has already been wired from First Bank to accounts overseen by Carroll.
The Pension Benefit Guarantee Corporation (PBGC) had liens against VICB for millions of dollars owed to pension funds — not by VICB, but by other Prosser-owned companies. The PBGC has agreed to release those liens in exchange for half of all proceeds from the sale in excess of $1.5 million, and Fitzgerald's order authorizing the sale approves that side agreement.
Interestingly, Banco Popular de Puerto Rico actually has or had possession of Prosser's 10,000 shares, which were apparently pledged by Prosser for his debts to Banco Popular. Court documents say Prosser owes Banco Popular approximately $1.3 million. The court authorized Banco Popular to bid for the bank, using Prosser's debt to the bank as a credit toward any bid. The bank chose not to do so and is not an active party to the proceedings beyond being among Prosser's creditors hoping for payment. Wednesday's court order directs Banco Popular to turn the physical shares — consisting of paper documents — over to Carroll within five business days.
Although the sale of VICB removes it from the ongoing Prosser bankruptcy, once the sale is finalized and payment received, the fight over who gets the money from the sale will continue. Prosser's personal creditors are jockeying for position to receive payment. And Springel, Chapter 11 trustee for ICC's bankruptcy, is arguing the shares in the bank were paid for by ICC and Vitelco, so the proceeds can't go to pay Prosser's personal debts, but must go to pay ICC's corporate debts. There will be many more developments before the dust settles. Meanwhile, VICB is out of the fray and continuing with its own business.
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