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Bank's Loans to Copeland Now Total $18 Million


The federally funded Los Angeles Community Development Bank has lent an additional $3 million to its largest and arguably most controversial borrower, bringing the total lent to Copeland Beverage Group in South Los Angeles to at least $18 million.

Half of the $3-million infusion was used for the acquisition of Commerce-based Pacific Dairy Products Inc., a producer of yogurt products, and half will be used for operations, a source familiar with the deal said Wednesday.

The loan comes just months after a January audit of the bank described the Copeland loans as "significantly impaired." According to the audit, bank management increased loan-loss reserves to cover the entire balance of the dairy loans in excess of what could be recovered through liquidation and collateral.

In a statement, Copeland Beverage Group Chief Financial Officer Joseph Feghali said expanding into the yogurt market will bolster Copeland's revenue and earnings.

The Copeland deal makes up about one-fifth of the bank's portfolio--at about 20 times the size of the average direct loan.

The Community Development Bank is the federal government's largest response to the 1992 L.A. riots. Now in its third year of operation, it is charged with making loans to businesses that have been turned down by commercial banks in the city's most troubled areas. In return, the businesses agree to hire locally.

The bank is struggling to repair a bruised reputation and battered portfolio by standardizing its underwriting procedures and better managing risky loans. In a report to the City Council earlier this year, the bank revealed that 60% of its loans were troubled and 16% were delinquent.

The Copeland deal has been controversial for its size and allegations by former CEO Kevin Copeland that the bank micromanaged his activities and contributed to his ouster last year. The bank has denied the allegations.

Bank spokesman Robert Alaniz said Copeland intends to shut down the Commerce dairy and absorb its yogurt operations. It's unclear how many jobs might be lost at the dairy or gained at Copeland.

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