87.5 F
San Fernando
Wednesday, Nov 29, 2023

Investor Skittishness Puts an End To Plans for New Community Bank

Investor Skittishness Puts an End To Plans for New Community Bank By CARLOS MARTINEZ Staff Reporter Investors in a proposed bank meant to serve independent pharmacists and the San Fernando Valley say they’ve given up their fight to open for business in Encino this year. Martin M. Cooper, who led a Valley-based investment group to establish Horizon Bank, blamed the terrorist attacks of Sept. 11 and subsequent investor skittishness for the failed bid. “We were approved to go out and start raising funds three days after Sept. 11,” he said. “After that, it became very difficult to find investors.” The investment group had sought to establish Horizon with an anticipated $7 million public offering last September. Under state and federal regulations, the bank needed to raise the funds within three months of the offering. But even after a deadline extension to March, the group was unable to come up with the funding to establish the bank. By the deadline stipulated by regulators, the group had raised $4.5 million well short of the $7 million needed to start the bank. “We had a lot of people give verbal commitments and they later decided that they didn’t want to invest, so we ended up coming up short,” Cooper said. “It was simply not being able to raise sufficient capital,” said S. Alan Rosen, an attorney and partner with the Calabasas-based law firm Horgan, Rosen, Beckham & Coren, which was working with Cooper to put the deal together. Cooper hoped to create the bank as a way to serve the region’s independent pharmacists, whom he claimed were underserved by traditional financial institutions. In the past, the independent pharmacists received financing and other financial assistance from drug wholesalers. All that ended in 1996 when an estimated 40,000 independent pharmacists were awarded the $723 million settlement of a class-action lawsuit that alleged that drug companies and wholesalers sold their products to chain-owned pharmacies at lower prices than they did to independent pharmacies, forcing many out of business. The pharmacists’ fluctuating cash flow is often justification to deny loans, Cooper said. The bank could have served an estimated 1,000 independent pharmacists in the Los Angeles area. But Cooper said the effort isn’t completely over. “We haven’t really decided yet what we’re going to do next, but for now it’s over,” he said. In hindsight and after the events of Sept. 11, Cooper said, his investment group should have postponed its public offering for six months. “We felt we could make a go of it and be successful, but it was just a bad set of circumstances that we couldn’t overcome,” he said. Rosen said, despite the abandonment of plans for the bank, he still feels the Valley needs another independent bank. “I still think there is a market for a community bank in this area. I just think circumstances were very difficult and beyond what any of us could have foreseen,” he said. More than a hundred investors who expected to be involved with the bank have all received their initial investments back with interest, Rosen said. “The important thing is that no investors were hurt, all got their money back with interest and now we move on,” he said. Jack Feldman, CEO of First Commerce Bank in Encino, said starting a new bank amid the financial uncertainties following Sept. 11 would have been difficult no matter who was involved or what the circumstances were. “You’re really hard pressed to find investors after Sept. 11, and that was probably the key,” he said. Although some investors approached the group asking about taking a controlling stake in the bank, Cooper said they were rejected. “The major issue was that they wanted to have their people on the board of the bank and we felt that, if we couldn’t do it the way we planned, we shouldn’t do it at all,” he said. Although Cooper and his investment group lost an undisclosed amount of money in the deal, Cooper said he’d do it all over again. “I’m disappointed, but I still think it’s a damned good idea,” he said. “If somebody came along and asked me to go on the board of a bank like this, I’d do it in a second.

Featured Articles

Related Articles