Georgia bank settles suit
United Community Banks, the third-largest banking company based in Georgia, has settled a lawsuit brought by the liquidators for a private equity fund that in 2010 purchased many of its bad loans.
The $2.5 million settlement helps the bank avoid potentially costly litigation, said Rex Schuette, United Community’s chief financial officer. The banking company has set aside an additional $1.5 million for another possible related suit and settlement.
In 2010, the private equity fund Fletcher, which has since filed for bankruptcy, had an option to buy $65 million of United Community’s preferred stock.
The option to purchase the preferred stock, which could be converted to common stock, was transferred to one of Fletcher’s funds. A liquidator for an affiliate of Fletcher, FILB-Co, filed the suit in an effort to redeem value from the stock options, which were never purchased. United Community claimed those options had no value because the exercise price to purchase and convert the preferred options to common stock was higher than the current stock price.
Fletcher also received a $30 million warrant — which is the right to purchase common stock — at $21.25 a share, which can be used until 2019. United Community’s stock is currently worth $10.83 a share. The $1.5 million set aside is related to a possible other suit trying to redeem value from the shares.
As a result of the settlement, United Community updated its financial statements for the year. The company made $33.9 million for the year, not $37.9 million, as had been reported earlier, and $5.3 million in the quarter, not $9.3 million.
About the Author
Arielle Kass covers Gwinnett County for The Atlanta Journal-Constitution. She started at the paper in 2010, and has covered business and local government beats around metro Atlanta. Arielle is a graduate of Emory University.
