Temecula Valley's $105 million capital raise with equity funds is off

New York, July 1 - Temecula Valley Bancorp Inc. said that its plan to raise $105 million through the sale of equity securities to private equity funds has been abandoned.

The investors said that a suitable deal could not be negotiated.

On June 1, Temecula Valley said it had agreed to sell $105 million of equity securities to Bancroft Capital and institutional investors including Orient Property Group LLC.

The investors would also have made a $105 million investment in a pool of targeted loans that are non-performing or sub-performing.

On completion of the transaction, the investors would have owned 95% of Temecula Valley's fully diluted equity and will have the right to designate and elect a majority of the board of directors.

The fund raising was to have been structured to "meet or exceed" Temecula Valley's capital requirements, the bank said.

In the equity portion, the investors were to receive voting securities for a total of $105 million that will receive Tier 1 capital treatment.

If preferred stock is issued, it was to be convertible at $0.50 per share, a 25% premium over the $0.40 closing price of Temecula Valley's stock on May 29.

But in a statement Wednesday Douglas McDonald, founder and president of Bancroft Capital, said: "We worked tirelessly with the management team at Temecula Valley Bancorp to create a structure that would allow a competitive rate of return for our investors while, at the same time, preserving value for existing shareholders.

"However, given the macro-economic factors at play and the continued deterioration in market fundamentals, we regrettably could not structure a feasible solution given the challenges that presented themselves."

Temecula Valley said it will continue to work on its regulatory action plan, including deleveraging its balance sheet and returning to its "roots as a community-focused bank."

Temecula Valley is a Temecula, Calif., bank holding company.

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