Firms & Funds

Corsair Capital makes 2.1x on exit of United Community Banks

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U.S. Treasury Secretary Tim Geithner is met with protesters with signs as he arrives to testify before the Congressional Oversight Panel on TARP on Capitol Hill in Washington, September 10, 2009. REUTERS/Hyungwon Kang (BUSINESS POLITICS) - RTR27OHL
  • New York firm invested in Georgia bank in 2011
  • Corsair anchored $380 mln recapitalization of bank
  • Firm completed exit in $144 mln stock sale on May 2

 

Corsair Capital generated a 2.1x return in five years on its investment in United Community Banks Inc after taking a stake in what is now the third largest bank-holding company in Georgia, an executive at the firm told Buyouts.

The New York firm and its LPs anchored a $380 million recapitalization of Blairsville-based UCBI in 2011 as the bank struggled with loan losses tied to a weak regional economy. At the time, the transaction resulted in a roughly 23 percent stake in the publicly traded lender.

“We recognized the depth of their bench from a management perspective; also, the business was well funded on the deposit side,” said James Kirk, principal at Corsair.

“Most important to us was making sure we dimensioned the size of the capitalization. We made sure — going in — that there was more than enough capital for the bank to have a cushion, even factoring in any potential losses.”

Corsair was also attracted to the bank’s potential role in financial-service consolidation in Georgia.

While Corsair Capital didn’t formally control the bank, it got a seat on the board and offered its expertise in financial services and its experience with regulators.

The firm invested about $100 million from the vintage 2010 Corsair Capital IV, which drew in about $863 million in commitments.

At the time, the bank was trading at 0.84x tangible book value, a discount to many of its peers. The bank executed a turnaround plan to address weak assets, pay back $183 million to the Troubled Asset Relief Program in 2013, return to profitability and embark on some acquisitions.

UCBI operates in Georgia, North Carolina, South Carolina and Tennessee, its website says. In its most recent deal, United Community Banks on April 4 set plans to buy Tidelands Bancshares Inc of Mt. Pleasant, South Carolina, for about $3 million.

Corsair Capital exited through public stock offerings, the last of which wrapped up on May 2 with about $144 million in gross proceeds.

Action Item: Corsair Capital investment criteria, http://bit.ly/1s6y6EG

Photo: U.S. Treasury Secretary Tim Geithner is met with protesters with signs as he arrives to testify before the Congressional Oversight Panel on TARP on Capitol Hill in Washington, September 10, 2009.  REUTERS/Hyungwon Kang