$3.6 Billion of Crocker Loans Sold to Midland
Crocker National Bank on Friday said that it had sold $3.6 billion in foreign and U.S. loans to its British parent, Midland Bank PLC, a move allowing Crocker to dispose of hundreds of millions of dollars in problem loans in a single neat stroke.
Separately, San Francisco-based Crocker revealed that it sold its 38.4% interest in the 44-story South Tower of the Crocker Center in downtown Los Angeles to JMB Realty, a Chicago real estate partnership, for an undisclosed price. The sale, which closed on Thursday, is expected to give Crocker a $39.4-million after-tax gain in the current third quarter.
The bank said it will retain its roughly 40% ownership of the 54-floor North Tower, which houses its Southern California headquarters. The Crocker Center will continue to be managed by Maguire/Thomas Partners of Los Angeles, also a co-owner of the property.
In addition, Crocker said it sold its interest in the eight-story Crocker Plaza in downtown Long Beach, realizing a one-time profit of $8.7 million in the third quarter. Crocker’s ground-floor bank branch will remain in the building.
The building--jointly owned by Crocker, Pacific Lighting Properties and developer Stanley Cohen--was sold for an undisclosed cash price to LaSalle Partners in Chicago, a pension fund investor and adviser.
The loan sale effectively cleanses Crocker’s balance sheet of most of its non-performing loans--those on which interest is not being earned--including troubled credits in Latin America and in domestic real estate and agriculture. Until this transaction, Crocker had the highest proportion of problem loans to total loans among major U.S. banks.
Midland will pay Crocker $50 million less than the book value of the loans, but the loss will be more than offset in other ways, Crocker said. It said the loan sale will strengthen Crocker’s capital position while shrinking its total loan portfolio to $12 billion from $15.5 billion.
The sale at once makes Crocker markedly healthier while having no appreciable effect on Midland, which as sole owner of Crocker already had accounted for the troubled loans on its books.
“Our future focus will be on the United States, with emphasis on California,” Crocker Chairman Frank V. Cahouet said. “We expect to be profitable in the third and fourth quarters this year and then to be an increasingly profitable member of the Midland Bank group.”
Bank Posted Profit
In the first six months of 1985, Crocker posted a net profit of $18 million after sustaining losses of $324 million last year.
In May, Midland completed its purchase of Crocker by increasing its stake in the bank from 57% to 100%. The transfer of Crocker’s troubled foreign lending business to its London-based parent was expected. But Midland also established a separate subsidiary in the United States to assume and manage $500 million in Crocker’s non-performing domestic real estate and agriculture loans.
Under the agreement, between now and year-end Midland will acquire $3.1 million in Crocker’s foreign loans, including $2.4 billion in credits to Argentina, Brazil, Chile, Mexico and Venezuela. Of the $3.1 billion, $446 million is classified as non-performing.
Crocker will retain about $400 million in foreign business--primarily loans to U.S. corporations operating abroad and correspondent banking relationships with foreign banks.