NEW YORK (AP) — Embattled New York Community Bancorp said Wednesday it will be offered a lifeline of more than $1 billion from a group of investors after its stock price fell more than 80% this year. did.
The deal will add four new directors to the bank’s board, including Steven Mnuchin, a former Treasury secretary under President Donald Trump. Former Comptroller of the Currency Joseph Otting will become the bank’s CEO.
Under the deal, which the bank said still requires “final documentation completion” and regulatory approvals, the bank will receive $450 million from Mr. Mnuchin’s Liberty Strategic Capital and $450 million from Hudson Bay. The company will receive an investment of $250 million from Capital and $200 million from Reverence Capital. The bank will support the deal if it raises more than $1 billion in cash from other institutional investors and some bank executives.
Investors will receive company stock valued at $2 per share, as well as convertible preferred stock that pays dividends every three months.
The company’s shares fell 42.2% to $1.86 early Wednesday, but trading was halted at 12:34 p.m. ET pending news. The Wall Street Journal reported Wednesday that the lender is considering raising cash through a stock sale to boost confidence in the company.
Trading in NYCB stock remained suspended as of 2:30 p.m. ET.
NYCB was a relatively unknown bank until last year. Purchased assets of Signature Bank It will be sold at auction on March 19th for $2.7 billion. As a result, their increased size required increased regulatory oversight. That’s part of the challenge for the bank, which is trying to reassure depositors and investors that it can handle the acquisition of Signature Bank and its troubled real estate portfolio.
The pressure increased after rating agencies downgraded NYCB’s credit rating.
NYCB announced earlier this year that it had discovered significant weaknesses in its internal loan review methods due to ineffective oversight, risk assessment and monitoring activities. Many of these issues were related to signatures, which placed the bank in a new regulated class with greater oversight. The long-serving chief executive officer (CEO) was also replaced.
Financial analysts continue to say NYCB’s problems appear to be specific to the bank and downplay the risk of spillover to the banking sector.
“It’s very interesting that they ended up consolidating some bank acquisitions that didn’t seem to work out,” said Chris Caulfield, a banking industry consultant and analyst at West Monroe who specializes in mid-sized banks. ” he says.
But the downturn in commercial real estate has become a pressing challenge for banks of all types, as changes in the way people work post-pandemic have led to more vacancies in many office buildings.
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AP Business Writer Ken Sweet contributed.
