Fremont to Sell Banking Business

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Fremont General Corp. agreed to sell its retail bank assets to CapitalSource Inc. of Chevy Chase, Md., although Fremont may have to file Chapter 11 protection to complete the transaction.


The buyer will pay $58 million in cash plus a 2 percent premium to get $5.6 billion in deposits, Fremont said in a filing. CapitalSource also agreed to loan Fremont as much as $200 million.


Fremont owns and operates 22 retail bank locations in Southern California. The sale does not include Fremont’s loan servicing operation or residential mortgage assets.


Fremont was told earlier that it would have to acquire capital or find a buyer by May 26. Last year, the Federal Deposit Insurance Corp. forced the bank to stop making subprime loans because the bank, which moved to Brea earlier this year from Santa Monica, didn’t ensure that borrowers could actually repay the loans.


Fremont may not be able to get shareholder approval for the sale by the deadline, the company said, so it may be forced to file for bankruptcy protection to help the sale move forward. The sale should be complete in the third quarter, CapitalSource said.


Shares in Fremont were up 18 percent Monday to 53 cents per share.

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