SP Acquisition, a New York-based asset-acquisition company sponsored in part by Steel Partners, said in July it would buy Frontier Financial for about $24 million in stock and warrants. On Monday, Frontier Chairman and CEO Pat Fahey said both companies could not secure the required regulatory approvals in sufficient time to complete the transaction.
As TheStreet.com reported on Sept. 23, SP Acquisition warrants had plummeted in late September, an indication traders believed there is a low probability of a deal being completed. While the warrants had traded near 40 cents earlier in the month, they had dropped to 15 cents on Sept. 23. On Monday, those warrants were trading only at only a fraction of a penny.
(Scroll down to comment on this story)Fahey added that Frontier would continue to work to resolve loan problems and shore up its capital position. In a regulatory filing last month, SP Acquisition Holdings said Frontier expects that its Tier 1 leverage capital ratio will drop below 4% as of Sept. 30, which would mean the bank would be considered "undercapitalized" by federal regulatory guidelines. In March, Frontier said it signed a Cease and Desist Order with the Federal Deposit Insurance Corp. and Washington State Department of Financial Institutions. Under the agreement, Frontier agreed to achieve and maintain a Tier 1 capital level of 10% of its total assets. The bank's Tier 1 capital ratio at year end 2008 was 8.53%.