Acme Files Chapter 11 to Avoid Takeover

The parent company of Allied Bank of Mulberry (Crawford County) was steered into bankruptcy court to stave off a possible takeover by a fellow lender.

The defensive move buys Acme Holding Co. more time in hopes of working out a solution with Chambers Bank of Danville and other creditors. Last week’s preliminary Chapter 11 filed April 29 by Acme doesn’t detail how much is owed to Chambers.

But the family of Lex Golden of Little Rock, which controls a 75.4 percent stake in Acme, is convinced the value of the stock is worth more than the debt it’s pledged against.

“We believe there’s equity there,” said his son, Alex Golden, president of Acme Holding and president and chief executive officer of Allied Bank.

The Chambers loan is secured by Acme stock, which represents control of the $138 million-asset Allied Bank. Acme Holding lists estimated liabilities of between $1 million and $10 million in its Chapter 11 reorganization petition.

Acme’s annual report listed debts of more than $7.9 million at year-end 2013. The debt was taken on to replace capital depleted by loan losses.

Allied Bank recorded equity capital of $10.6 million as of March 31. That figure reflects a drop of more than 40 percent since the end of 2010, when equity capital stood at $18 million.

Allied Bank lost $3.25 million related to its dealings with Little Rock lawyer Kevin Lewis, who is in federal prison for using bogus special improvement district bonds as security for loans from Allied and other lenders. That scam was uncovered in late 2010.

Battered by loan losses, Allied Bank drew the critical eye of bank regulators. That culminated in a 2012 consent order designed to improve the Golden family’s management of loan operations, liquidity and capital.

Along the way, Lex Golden’s role with the bank changed from chief lending officer to executive vice president/special assets officer, and his daughter, Amy Golden McCay, exited the bank as vice president.

The supervisory agreement with the Federal Reserve Bank of St. Louis also restricted the bank’s fiscal options for contending with the holding company debt while safeguarding its equity capital.

“The problem is debt,” said Alex Golden. “If the bank can’t dividend up to the holding company, it’s got a problem. It just got to the point where [Chapter 11] was a prudent thing to do to protect the investors from the primary lender taking possession.”

If Acme’s debt can’t be re-worked, the Chapter 11 could facilitate more favorable terms for relinquishing ownership of the leveraged Acme stock.

Beyond the Golden family, the two remaining blocks of stock are held by Tom Gibbons, a retired partner in the Little Rock accounting firm of Frost PLLC, and non-Golden family staffers with a stake in Acme’s Employee Stock Ownership Plan.

Gibbons bought his 21 percent share of Acme a few years ago. The ESOP holds a 41.1 percent share of Acme. The bulk of that is controlled by the Golden family.

The value of the ESOP shares has plummeted from $37 per share at year-end 2009 to less than $1, according to an ESOP source.

“We’ve lost it all,” said an Allied staffer, pessimistic about a turnaround.

The ESOP’s ownership of Acme is linked with $1.4 million owed on a loan originated by First Southern Bank of Batesville.

That debt was inherited by Southern Bank of Poplar Bluff, which acquired the failed bank in December 2010 in the wake of the Kevin Lewis special improvement district bond scandal.

The Chapter 11 filing describes the $1.4 million as an unsecured debt held by Southern Bank along with $2 million originally owed to Heartland Bank of Bryant but now held by Axys Capital Management of Austin, Texas.

The Southern Bank loan has been classified as nonaccrual for “some time,” according to an insider.

The Chapter 11 filing by Acme Holding Co. marks the second bankruptcy filing for an Arkansas bank holding company in less than 10 months.

Rogers Bancshares Inc., the parent company of Metropolitan National Bank of Little Rock, filed for Chapter 11 on July 5 last year.

The move was made to facilitate an auction that resulted in the $53.6 million sale of Metropolitan to Simmons First National Corp. of Pine Bluff.

Like Rogers Bancshares, Acme Holding took on debt to shore up its bank, and the financial problems at the holding company have everything to do with loan problems at its bank.

The Chapter 11 of Acme isn’t portrayed as an auction, but some banking sources believe the end result will be new ownership of Allied Bank.

Executives at the $758 million-asset Chambers Bank declined comment.

Lex Golden and John Chambers, CEOs of their re-spective bank holding companies, have known each other for many years, and a business relationship between Golden’s Acme Holding and Chambers Bank isn’t a recent thing either.

More than 12 years ago, Golden was on the brink of selling Allied Bank (then known as Bank of Mulberry) to Chambers Bancshares.

That deal to acquire the bank and its $25 million in assets was called off in September 1996.

The $3.27 million purchase already had received regulatory approval, but both parties decided to not follow through during the 90-day waiting period.

Today’s Allied Bank is the same size as another financially bruised lender whose owners leveraged its stock with Chambers Bank.

The $138 million-asset Decatur State Bank (Benton County) recorded a $1.1 million profit during the first quarter after Chambers took over the bank.

The change of ownership came after Decatur’s parent company, Peterson Holding Co., defaulted on a loan to Chambers Bank.

In a prepared statement, Lex Golden, chairman and chief executive officer of Acme Holding Co., said:

“When first hit by losses related to the Kevin Lewis fraud in 2010, Acme borrowed money to infuse into the bank. This loan was secured by Acme’s ownership in Allied Bank and represented a fraction of its value.”

“The slowed economy and increasingly stringent regulatory oversight has made its original plan of repayment difficult.

“Our lender has unfortunately objected to our plan to restructure ourselves to resolve the issue and has demanded immediate payment.

“Rather than surrender the bank over this dispute, we have elected to seek temporary protection under the bankruptcy code.

“We feel very confident our plan will result in full payment of all Acme creditors in short order and ultimately protect the equity we have worked so hard to achieve since 1986 when our family purchased our interest in the bank.”