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Fremont General enters into P/S agreement with CapitalSource TRS

Fremont General Corporation, doing business primarily through its wholly-owned bank subsidiary Fremont Investment & Loan, has entered into a definitive purchase and sale agreement with CapitalSource TRS.

The agreement provides for the purchase of substantially all of the Fremont Investment & Loan’s (the bank) assets, which includes its participation interest in certain previously sold commercial real estate loans, the assumption of all its deposits and the acquisition of all branches, by a California industrial bank to be organized and wholly owned by CapitalSource TRS.

CapitalSource TRS will pay a 2% premium on all the bank’s deposits, and will purchase the bank’s participation interest in previously sold commercial real estate loans at a 3% discount to its net book value. The bank’s other assets to be sold in the transaction, at net book value, include real and personal property, cash and certain other assets. CapitalSource TRS will pay the bank at closing an additional $58 million in cash.

The deposit premium, the $58 million in cash and the purchase price for the participation interest, cash and other assets being sold by the bank will only partially offset the deposits being assumed by CapitalSource TRS.

Consequently, in order to facilitate consummation of the transaction, to the extent that the bank does not have sufficient funds available at the time of the closing the agreement provides that an affiliate of CapitalSource will provide the bank with a loan of up to $200 million, to be secured by the bank’s servicing advance receivables.

The proposed transaction does not include the sale of the bank’s loan servicing operations or residential mortgage assets. Completion of the proposed transaction is subject to the approval of the Federal Deposit Insurance Corporation and the California Department of Financial Institutions.