For the second time in two months, the V.I. government has approved V.I. Community Bank’s bid to acquire Chase Manhattan Bank’s assets in the territory.
If the Federal Deposit Insurance Corp. approves the sale, it will now go through, VICB's Michael Dow said Friday.
Dow's comments followed an announcement Friday by Lt. Gov. Gerard Luz James II, chairman of the V.I. Banking Board, that the board unanimously agreed on an amended approval of the deal Thursday at a meeting on St. Thomas. The amended decision follows the board’s previous approval in May that VICB officials rejected as too restrictive, later declaring that the deal with Chase was no longer feasible.
A copy of the amended approval shows only slight — but obviously important — differences from the board’s initial May decision.
Following that conditional approval, Dow, VICB's president and chief executive officer, said the terms in the banking board’s approval were intended to defeat the transaction by placing "intrusive conditions never before imposed on any other bank application."
The conditions, which were submitted by VICB, included a $300,000 annual banking fee and an agreement that the bank wouldn’t seek to renew its Industrial Development Commission tax breaks at the end of 2004. VICB is the only bank in the territory that receives IDC benefits, which include 100 percent breaks on real property taxes, gross receipts and excise taxes and a 90 percent break on corporate income taxes.
In the amended approval, VICB, which is owned by St. Croix businessman Jeffrey Prosser, will pay an annual banking fee of $400,000 over and above current licensing fees for each year remaining on its IDC certificate. As in the May approval, VICB won’t seek a renewal of the benefits.
In an interview Friday, Dow said VICB’s IDC benefits will accrue to the Chase acquisitions until the end of the IDC certificate in 2004.
Dow said the important changes in the amended approval are that the Banking Board isn’t requiring VICB to have a $150 million line of credit with the Federal Home Loan Bank of New York. Rather, the banking board agreed that VICB must receive a commitment from the FHLB that it will extend a line of credit in excess of $100 million to VICB and that the local bank will maintain its eligibility.
Another condition called for by the banking board in the May decision was its approval of 30 percent of VICB’s board of directors. The amended approval calls for representation from St. Thomas, St. Croix and St. John on VICB’s board of directors with 30 percent of the board members from outside the bank’s ownership, which Dow said was always intended.
The difference is that the banking board will not select or appoint VICB’s board members.
"The changes were very minor," James said. "It’s basically the same with just some minor adjustments."
With the amended approval, VICB will close its transaction with Chase, Dow said. He added, however, that the FDIC still must approve the deal. He said the FDIC’s New York office has passed its recommendation on to Washington, D.C., where the FDIC board of directors will make a decision.
"The amended approval makes it possible for us to close this transaction," Dow said. "The bottom line is we’re happy that point is behind us. He added that he is "totally confident" the FDIC will bless the deal.
The banking board began the approval process last August that would see VICB purchase Chase’s seven branches in the USVI: four on St. Thomas, one on St. John and two on St. Croix. Chase has approximately 280 employees in the territory who would be kept on after the sale.
"It’s been awhile but we’ve come to a good understanding," James said about meetings with VICB officials. "It lends to a good transaction in the Virgin Islands that places all those Chase employees in good stead."
As part of the agreement between VICB and Chase, both individually and on behalf of his company, Innovative Communication Subsidiary Co., LLC, Prosser agreed to keep all the branches open for at least 90 days and to offer "comparable employment" to all existing employees for at least one year after the purchase.
Meanwhile, Dow said VICB will now concentrate on the acquisition of Chase’s assets in the British Virgin Islands.
