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Allied Bank Assets Undervalued — or Not

2 min read

Among the Allied Bank assets discussed during Acme Holding’s recent bankruptcy hearing were energy stocks valued at $3.8 million in a 2012-13 appraisal.

According to testimony, the bank inherited the stock after borrowers defaulted on loans secured by shares in two private companies.

The value of the energy stock was marked down to $2.2 million and finally to one single dollar at the insistence of bank regulators. The illiquid securities consisted of 88 shares of RAAM Global Energy Co. and 10 units of Rock Energy Holdings LLC of Little Rock.

RAAM Global of Lexington, Kentucky, files public disclosures with the Securities & Exchange Commission although it is a private venture. The oil and gas exploration and development company is working through its own financial challenges after defaulting on a $50 million line of credit last year.

Less is known about Rock Energy, described as owning oil and gas interests primarily in Texas. The limited liability company was formed by Joseph Gregory in December 2009.

At the time, Gregory was an attorney at the Little Rock law firm of Jack Nelson Jones. These days, he’s senior vice president and general counsel at Heartland Community Bank and its parent company, Rock Bancshares Inc.

Who owns Rock Energy? “I’m a lawyer, and that’s privileged information,” Gregory said.

Alex Golden indicated some cursory efforts were made to sell the energy stock but market conditions weren’t favorable to obtaining a good price. He contends the stock is an undervalued asset.

During January 2014, RAAM Global reported issuing eight shares of common stock to an employee in January 2014 as compensation for services performed. The company placed the fair value of the shares at $12,000.

Using that valuation as a measuring stick, the shares held by Allied Bank were worth $132,000 15 months ago. The current value hasn’t improved, given RAAM’s $85 million loss during 2014 and ongoing debt-service problems.

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