American private equity investment firm J.C. Flowers signed a memorandum of understanding with Romanian lender Banca Carpatica’s shareholders to take over the bank.

The fund, which is managed by American billionaire and a former Goldman Sachs partner J. Christopher Flowers, will inject some EUR 25 million in the bank, via a share capital increase. The investor also agreed to buy shares from Banca Carpatica’s current shareholders, including Romanian businessman Ilie Carabulea, who owns a 45% stake.

Banca Carpatica has been struggling to find an investor for more than a year, after Romania’s National Bank declared Ilie Carabulea, the bank’s founder and controlling shareholder, unfit to own the bank because of bad reputation. Carabulea served a jail conviction for bribery and last year was arrested in another corruption case.

At that time, Carpatica was just recovering after a few years of big losses caused by non-performing loans (NPLs) which at one point reached more than half of its loans portfolio. The bank’s management received the central bank’s approval to start looking for investors to take over the bank, but Carabulea opposed this at first. Carpatica’s shareholders rejected a merger with another local lender, Nextebank, owned by private equity fund Axxess Capital, in December last year.

Instead, they approved a share capital reduction followed by a share capital increase, to capitalize the bank. J.C. Flowers agreed to subscribe the new shares the bank would issue.

Banca Carpatica had losses of over EUR 38 million in 2014, after making new provisions for non-performing loans, which further weakened its already stretched capital base. At the end of March 2015, Banca Carpatica had a loan portfolio worth EUR 285 million and a deposit base of EUR 635 million.

Banca Carpatica’s shares are trading on the Bucharest Stock Exchange with the ticker BCC. The shares went up by almost 8% on Friday after it announced the agreement with J.C. Flowers. Its market capitalization thus reached EUR 33 million.

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editor@romania-insider.com