Wells Fargo Inspecting MCorp’s Books : San Francisco Firm Could Bid for Dallas Company, Report Says

San Francisco-based Wells Fargo has sent a team to examine the books of MCorp, the troubled bank holding company based here, and could emerge as a serious bidder for the company, according to a published report.

The Dallas Times Herald, citing sources, reported in Wednesday’s editions that the Wells Fargo audit team of more than 40 began its inspection of MCorp on Monday. Officials at both companies declined to comment.

Wells Fargo is the nation’s 11th-largest bank holding company, with $45.1 billion in assets. It was among the losing bidders for First Republic, which was sold to NCNB of Charlotte, N.C., in July. NCNB Texas National Bank--First Republic’s new name--is the only Texas bank holding company bigger than MCorp.

Wells Fargo was outbid for First Republic even though its bid included $1 billion in cash, one source told the Times Herald.

A buyout bid by Wells Fargo would be the first for MCorp from an outside institution.

MCorp’s management had originally hoped to save the company without federal aid and without competition from other bank holding companies. But in its second-quarter report last summer, MCorp said it might be impossible to raise capital without federal help. In October, the company sought federal assistance.

Backed Off on Demand

The company’s recapitalization proposal would include $400 million from the bank holding company, $400 million raised from shareholders and an investment group headed by Cincinnati financier Carl Lindner, and an undisclosed amount from the Federal Deposit Insurance Corp. Banking analysts have estimated that amount could be as much as $1 billion.

Regulators demanded that the $400 million MCorp had set aside be distributed to the company’s subsidiary banks, but MCorp refused. In late October, the company announced a 30-day moratorium on all debt payments and preferred shareholder dividends. It also said a Chapter 11 bankruptcy filing might be the only way to reorganize the company and protect the interests of shareholders, depositors and creditors.

Regulators backed off on their demand early last month and allowed MCorp to keep the $400 million in the holding company.

That allowed MCorp to turn its attention to its creditors. With the company $470 million in debt and the 30-day moratorium having passed, creditors can now force the company into bankruptcy, a process that MCorp says would be time-consuming and expensive. Bank officials met with some bondholders late last month, but no action has resulted. Another meeting is scheduled next week, and creditors have informally agreed not to force the company’s hand.

In the meantime, FDIC has begun talking to a number of prospective bidders about MCorp, but Wells Fargo is the first to send a team to examine the books.