BHL Financing LLC, a Benton County firm owned by billionaire Johnelle Hunt, has agreed to transfer its interest in One Financial Corp., the parent company of One Bank & Trust Co. of Little Rock, to the U.S. Department of the Treasury, court documents indicate.
Pulaski County Probate Judge Mike Reif signed an order last week approving the move.
Details of the transfer have not been released.
For about three years, One Bank, BHL and the government have worked together to rebuild the bank, said Jerry Pavlas, chief executive officer of One Bank.
One Bank's holding company owed multimillion-dollar debts to both BHL and the government.
Layton Stuart, owner and chief executive officer of One Bank until forced out by federal regulators in 2012, signed two promissory notes to BHL in 2002 and 2007, to secure two loans totaling $28.8 million, BHL claimed last year in a lawsuit.
A promissory note is a legal document in which one party promises in writing to pay a debt to the lender.
The promissory notes gave BHL a security interest in Stuart's 100 percent ownership in One Financial Corp., BHL said.
Stuart died in 2013 at age 62.
J.B. Hunt, who owned BHL Financing, died in 2006. Johnelle Hunt is his widow.
In addition to loans made to Stuart, the government had a claim on the bank for about $10 million. That was for its 2009 loan of more than $17 million to One Financial as part of the Troubled Asset Relief Program less $6.9 million from a life insurance policy held by Stuart that was paid to the government last year.
The value of the bank is uncertain. But book value or equity is a common method of valuing banks in Arkansas. One Bank's book value as of March 31 was $16.7 million.
"All the parties are in agreement, all the documents have been prepared and signed," Pavlas said. "And we're in the process of finalizing the implementation and closing of the settlement agreement."
There are some technicalities that are slowing down the closing of the deal, said Pavlas, who signed the agreement. Pavlas didn't elaborate on the technicalities.
Ken Shemin of Rogers and Grant Fortson of Little Rock, attorneys representing BHL Financing, did not return phone calls seeking comment.
Rob Runyan, a spokesman for the Treasury Department, declined to discuss the agency's deal with One Bank.
The agreement means "this saga is pretty darn close to being concluded," said Tom Prince, special administrator of the Layton Stuart estate.
Prince, who said he was not involved in discussions leading to the settlement, said he is unfamiliar with the "strange arrangement" involving the transfer of assets to the U.S. Treasury.
"I've wanted to talk to the Treasury Department and the bank people and ask them, 'What next, now that the bank and the holding company are owned by the Treasury Department?' And they are all reluctant. There are confidentiality agreements.
"But it seems that the bank is now sitting on an opportunity to recapitalize itself and get the ownership ultimately in private hands and out of the hands of the government," Prince said.
The Treasury Department is giving One Bank an opportunity to determine the best path for the bank to take, Pavlas said. The agreement clears the way for a recapitalization of the bank, a restructuring of a company's mix of debt and equity.
"The most typical path would be that we'd work with an investment banker and with investors, whether it is institutional or private investors," Pavlas said.
Any transaction would include the Treasury Department, Pavlas said.
"You would like to get rid of all the debt at the holding company and probably dissolve the holding company as it is presently structured," Pavlas said.
There's more to the agreement than is being disclosed, said a bank-law expert who is not involved with the deal.
"Why would Mrs. Hunt give up 100 percent of the holding company voluntarily?" said the expert, who did not want to be identified. "It doesn't make sense. She wouldn't want to be a benefactor to the government."
It also is obvious that the Department of the Treasury is not obtaining the stock to operate One Bank, the banking expert said.
"They are going to want to get some money for that from some place, apply it to their debt and give up interest in the bank," the expert said.
Business on 06/24/2016