First Place Bank could be sold at ''what seems to be a fraction of its net worth'' according to the official committee appointed to oversee the public interest in the bank's bankruptcy case.
Federal Bankruptcy Judge Brendan L. Shannon, hearing the case in Delaware, agreed Tuesday to delay a court hearing to consider the bank's sale, but only by one week. The hearing will now be held Dec. 14.
That still may not be enough time, according to the "Official Committee of Trust Preferred Securities,'' which filed motions last week objecting to the speed of the sale.
In its motion, the committee criticized First Place Bank officials of taking a "half-hearted" approach to canvass the marketplace and now seeking to impose a ''weeks-long process on competing bidders.''
''The debtor claims that it has been 'exploring ways to bolster the bank's capital through a merger, sale or other transaction with a third party' since at least December 2011,'' the motion reads. ''But it was not until June 2012 that it 'began an intensified process to market the bank,' begging the question of what transpired for those seven months. Now the debtor claims there is an emergency that requires the sale to be completed by the end of the year.''
According to the motion, the debtor's proposed bidding procedures will prevent a competitive auction and undermine the goal of maximizing value for the debtor's estate.
The motion continues that the timeline for bidding, obtaining regulatory approval and being prepared to close are so burdensome that they effectively prevent any other bidder from participating. It also states the deal protections are so favorable for the lead bidder, Michigan-based Talmer Bancorp., that they ''effectively chill interest from any other interested party.''
The proposed purchase price is $45 million, with promises to recapitalize the bank at a cost of about $205 million.
The committee requested that the sale hearing be delayed from the original date of Dec. 7, arguing that without the delay, other potential bidders would have only nine business days from approval of bidding procedures to submit competing bids. With the court's delay of one week, bidders now will have 14 business days to prepare bids.
The judge on Monday approved a request by the bank to file its response under seal to the objections filed by the committee.
The Warren bank's holding company, First Place Financial Corp., filed Oct. 29 for federal bankruptcy protection, blaming the current financial and credit crisis that resulted in hundreds of nationwide bank failures since 2008.
According to an affidavit filed in court by First Place's Chief Financial Officer, David W. Gifford, the company was ordered by federal regulators to reach specific capital levels by Dec. 31, 2011, or face voluntary dissolution or merge with another financial institution.
Gifford said when the bank was unable to meet the regulators' requirements, officials in June began an intensified process to market the bank. During that process, Talmer emerged as the only financial institution from 44 targeted companies willing to acquire the bank's entire franchise.
The committee's court filing last week maintained, however, that it is unlikely the bank would have failed, and noted the committee is not aware of a single large bank or thrift with the debtor's capital position and asset quality that has failed during the recent financial crisis.
''Despite the debtor's assertions that the bank is at risk of 'imminent failure,' the bank's financial condition appears to be steadily improving,'' the committee said in its objection. ''We note that the debtor does not mention the bank's profitability anywhere in its court filings.''
The objection also argues of significant questions as to whether the purchase price reflects fair value and notes the debtor has offered no evidence to indicate it is.