Fidelity Federal Bank Restructuring OKd

Citadel Holding Corp. in Glendale said that its board has approved a restructuring and recapitalization plan to bolster capital levels at its troubled Fidelity Federal Bank subsidiary.

The plan, adopted under pressure from federal regulators, calls for Fidelity to sell $490 million of problem real estate assets, of which $24.5 million would be acquired by Citadel.

Fidelity would also sell $110 million of new common stock to pay debts and improve its capital position, Citadel said. On Friday, Fidelity said it filed documents with the Office of Thrift Supervision for a proposed offering of about 21 million to 22 million shares for $5.25 each.

Citadel said the transactions would address concerns by the OTS, the federal agency that monitors the financial health of savings and loans, about the quality of Fidelity’s assets and capital levels.

After the recapitalization, the new stock issued by Fidelity would represent more than 75% of Fidelity’s outstanding shares of common stock, while Citadel’s stake in Fidelity would be less than 25%. Citadel’s final ownership interest in Fidelity would depend upon such factors as Fidelity’s second quarter operating results, the prices fetched for the assets and the level of Fidelity’s troubled assets as of June 30.

Also under the plan, Fidelity would transfer other assets to Citadel, including Citadel’s corporate headquarters. Fidelity would elect a new board of directors, with three current directors remaining.

The restructuring is expected to reduce Fidelity’s problem assets to less than 1% of its total assets, and increase its core capital to more than 5% of total assets, the company said.