Dallas-based Texas Capital Bancshares Inc. announced Sept. 6 that it agreed to sell BankDirect Capital Finance, its insurance premium finance subsidiary, to AFCO Credit Corp., an indirect wholly-owned unit of Truist Financial Corp., for $3.4 billion in cash.
The BankDirect sale includes its business operations and loan portfolio of $3.1 billion as of June 30. The purchase price represents an 8.5 asset premium over the value of the purchased loan portfolio.
The divestiture is expected to close in the fourth quarter.
The move is part of Texas Capital’s strategy to re-focus its capital and expenses for the creation of a full-service financial services firm in the state.
“The sale follows a deliberate process designed to maximize shareholder value, strengthen our balance sheet, simplify our business model and free up incremental resources to be redeployed to our core businesses,” Texas Capital CEO Rob C. Holmes said in a statement.
Morgan Stanley & Co. and Texas Capital Securities were financial advisors to Texas Capital, which used Cravath, Swaine & Moore as legal counsel led by Mark Greene, David Portilla, G.J. Ligelis Jr. and Bethany Pfalzgraf in New York.
Working on the transaction was Texas Capital’s chief legal officer is Anna M. Alvarado, who joined the bank last October. She said this pivotal deal will provide dry powder to the firm, “enhancing its capacity to concentrate efforts and reposition capital in support of businesses where Texas Capital can be relevant by offering products and services other than loans.”
Previously, Alvarado was general counsel for 10 years at Fort Worth-based FastCash Inc., which is the leading international operator of pawn shops and a provider of technology-driven point-of-sale payment solutions.
A graduate of SMU Dedman School of Law, Alvarado began her legal career at Hill Gilstrap and then at Tanner & Associates, a boutique law firm specializing in labor and employment.
Truist used RBC Capital Markets and Truist Securities as financial advisors and Willkie Farr & Gallagher as legal counsel led by partners Gregory Astrachan and Sean Ewen in New York.
Truist Insurance Holdings Inc., a unit of Truist Financial, is the sixth-largest insurance brokerage in the U.S. The transaction will add the $3 billion in loans to Truist Insurance Holdings’ premium finance business—which also includes CAFO Inc., its Canadian operation—while broadening its business into life insurance.
The transaction is expected to increase Texas Capital’s capital levels. Its Common Equity Tier 1 ratio is expected to increase 199 basis points and its tangible book value per share accretion is estimated to be 6.5 percent.
The divestiture will also improve Texas Capital’s liquidity position, as the loan-to-deposit ratio is expected to decline and the liquidity assets-to-assets ratio is anticipated to rise.