Mar 19, 2023
Tom Barrack Playing Key Role in Talks to Save First Republic
(Bloomberg) -- Colony Capital founder Tom Barrack is taking a leading role in advising First Republic Bank on its options as the lender races to avoid a collapse after a $30 billion rescue last week failed to assuage investors, according to people familiar with the matter.
Barrack, 75, a member of First Republic’s board and a longtime friend of former President Donald Trump, is working closely with Executive Chairman Jim Herbert in orchestrating any potential deal, said the people, who asked not to be identified because the discussions are private. Barrack declined to comment.
The lender has sought to reassure customers and clients that it can avoid the fate of Silicon Valley Bank, which collapsed earlier this month after its depositors fled. On Thursday, First Republic announced that almost a dozen US banks, including JPMorgan Chase & Co., Citigroup Inc. and Bank of America Corp., would make a combined $30 billion of unsecured deposits in a show of confidence for the San Francisco-based firm.
That move provided only a temporary reprieve for First Republic’s battered shares, which tumbled 33% to $23.03 on Friday, extending their decline for the year to 81%. Moody’s Investors Service cut the bank to junk, warning that the rescue could weigh on profits.
S&P Global Inc. lowered First Republic’s long-term issuer credit rating further into junk territory on Sunday, to B+ from BB+, confirming an earlier Bloomberg report. It was the ratings firm’s second downgrade of the bank in less than a week.
Read more: First Republic Downgraded by S&P for the Second Time in a Week
With the fresh $30 billion and cash on hand, First Republic “is well positioned to manage short-term deposit activity,” the company said in an emailed statement. “This support reflects confidence in First Republic and its ability to continue to provide unwavering exceptional service to its clients and communities.”
Last year, Barrack stood trial in federal court on charges that he tried to influence Trump’s campaign as an agent of the United Arab Emirates. Barrack was found not guilty on all nine counts, including failing to register as a foreign agent, obstructing justice and lying to federal agents.
Herbert, who was First Republic’s CEO for 37 years, has ranked among the highest-paid US executives.
See also: First Republic Goes From Wall Street Raider to Rescue Target
Barrack, who founded Colony Capital in 1991, stepped down as chief executive officer in 2020 and relinquished his role as executive chairman the following year. Months later, the Boca Raton, Florida-based investment firm rebranded itself as DigitalBridge Group Inc.
In 2010, under Barrack’s leadership, Colony teamed up with General Atlantic to acquire First Republic from Bank of America.
(Updates with S&P rating cut in fifth paragraph.)
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