Groups affiliated with Gerald J. Ford and Robert M. Bass have agreed to put money into troubled SWS Group Inc., Dallas.
Ford's Hilltop Holdings Inc., and Bass' Oak Hill Capital Partners are each lending SWS $50 million. The loans have a five-year term, are prepayable after three years and have an annual interest rate of 8%.
In return, Hilltop and Oak Hill will each receive a warrant that will allow them to buy nearly 8.7 million shares of SWS stock apiece, at a price of $5.75 per share. If exercised, these companies will own 34% of SWS collectively. The excise price is below the $6.15 per share SWS closed at on Friday.
That same day, SWS rejected an offer from Sterne Agee to buy the company at $6.25 per share made on March 17. The day before that offer, SWS closed at $4.93 per share.
Ford is expected to join SWS' board; he is currently the chairman of Hilltop and the former chairman and chief executive of Golden State Bancorp Inc., and its subsidiary California Federal Bank FSB.
Bass was an investor in American Savings Bank, Stockton, Calif. Oak Hill's representative is expected to be its managing partner, J. Taylor Crandall.
SWS is the parent company of Southwest Securities FSB, which entered into a cease and desist order with the Office of Thrift Supervision on Feb. 4. SWS said deterioration in the commercial real estate loan portfolio at the thrift led to increased credit costs and classified asset levels and thus the need to raise capital.
The thrift segment posted a pre-tax loss of $5.8 million in the second quarter of fiscal 2011, which ended on Dec. 31, 2010.
Non-performing assets decreased to $103.0 million, from $127.1 million at the end of the first fiscal quarter, but up from $64.6 million at Dec. 31, 2009.
The loan loss provision in the second quarter of fiscal 2011 was $6.7 million, as compared to $39.5 million in the first quarter of fiscal 2011 and $4.7 million in the second quarter of fiscal 2010.
Net charge-offs were $5.1 million in the fiscal 2011 second quarter, $29.3 million in the fiscal 2011 first quarter and $3.9 million in the fiscal 2010 second quarter.
Securities FSB had been one of the major warehouse providers but in the fourth quarter began to downsize its involvement.
