CIB Marine Bancshares in Brookfield, Wis., is the latest target of shareholder activism.
Hildene Capital Management in Stamford, Conn., said Wednesday that it had nominated two directors for CIB Marine's board ahead of the $751 million-asset company's annual meeting. In a letter to shareholders, Jennifer Nam, Hildene's chief operating officer, said a board shakeup was needed to ramp up management accountability after years of underperformance.
CIB Marine’s shares are down about 27% over the past 36 months.
Nam claimed that the current board had allowed executives to maintain a capital structure that does not favor shareholders.
Hildene and funds it manages own about 36% of each of CIB Marine's Series A and Series B preferred stock, along with 0.1% of its common stock.
Nam said Hildene had proposed a new capital structure that the company refused to consider. The investor wants CIB Marine to issue subordinated debt to redeem Series A preferred stock at a discounted value.
CIB Marine’s board “has a clear reluctance to value-maximizing changes,” Nam said. “As we are not willing to accept that, we felt we had no other choice than to publicly make our case for change to you directly."
Brian Chaffin, CIB Marine's president, said the company was carefully studying Hildene’s letter and would provide a written response to shareholders and news outlets next week. He told American Banker on Wednesday that over the past three years the company has redeemed 26% of its preferred shares.
The process for redeeming preferred stock is deliberate and gradual, Chaffin said, because they must be done at terms that benefit all shareholders, not just one class of investors.
Hildene said it nominated John Scannell and Raymond Tellini to stand for election to CIB Marine's board. Scannell is a senior adviser at Hildene, while Tellini is co-chief investment officer of Delta Capital Management Partners.
Hildene invested in community banks primarily through trust-preferred securities, instruments issued by banks and other financial services companies. The investor's stake evolved from an initial investment on those types of securities.
In the wake of the 2008 financial crisis, a number of bank holding companies filed for bankruptcy protection and sold their banks largely because they were unable to make the interest payments on their trust-preferred securities.
