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Letter: New Haven Savings Bank's 'Devious' Plan
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Business New Haven
10/27/2003
By:
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I was in banking for almost 20 years. A significant portion of my time was spent evaluating, negotiating and planning acquisitions of other banks. I don't think that I could say with a straight face that the conversion of New Haven Savings Bank is in the best interest of the community, so I will leave it at that.
What impresses me is the craftiness with which this issue was framed. Not only is New Haven Savings Bank proposing to convert to stock charter but, concurrently, they are seeking to expend the conversion proceeds upon the acquisition of other banks.
Typically, agreements to acquire banks permit both parties to receive damages or break-up fees if the other party is unable to perform. So, if New Haven Savings Bank fails to convert to stock charter, which is required to buy the other banks, they may be liable for the payment of a large sum of money - typically five to ten percent of the intended transaction value - to the other banks.
In effect, the back door is closed, and anyone in the approval chain must realize that a "no" impairs the financial viability of New Haven Savings Bank.
Brilliant, but devious.
- Derek Hotchkiss
Woodbridge
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