Regulators Press Effort to Find Buyer for S
Federal regulators are apparently stepping up their efforts to sell troubled Central Savings & Loan Assn., which since May has been managed by an Arizona bank.
Two weeks ago, two would-be Central buyers--Citicorp Savings and American Capital Corp.--sent teams of executives to San Diego to review Central’s books and records. The examination, according to industry sources, was apparently solicited by the Federal Home Loan Bank Board.
Citicorp Savings, an Oakland-based subsidiary of giant Citicorp, showed an interest in buying Central when regulators requested bids for the troubled San Diego-based S&L; last year, as did more than a dozen other financial institutions. But Citicorp Savings, with four of its 92 California branches located in San Diego, did not make a formal bid.
Miami-based American Capital, which owns TransOhio Savings Bank, made a formal bid for Central last year, but the deal soured when regulators asked the firm to also buy a failing thrift in the East. American Capital also owns Central’s former mortgage arm, Centralfed Mortgage Co.
Citicorp officials would not comment on the Central matter, and officials of American Capital were unavailable.
American Capital earlier this year raised about $80 million in capital through the sale of debentures, specifically to buy Central.
But regulators believe that it will take much more capital to boost Central’s sagging net worth, which, as of June 30 stood at only $15.1 million, or 0.65% of its $2.3 billion in assets. Included in that net worth is $122 million in “income capital certificates” issued by regulators in June to bring Central’s net worth into the black.
Selling Central is only one option open to regulators. The troubled S&L; could be run as is under a long-term management contract with First Federal Savings Bank of Arizona, which has operated Central since May 31, when regulators forced the resignation of Central’s board.
Or Central could be broken into two components, a “good bank” and a “bad bank,” according to an article in Wednesday’s American Banker, the daily industry newspaper.
Under this scenario, Central’s “bad assets” could be lopped off and given to the newly created Federal Asset Disposition Assn., formed to manage the questionable assets of companies insured by the Federal Savings & Loan Insurance Corp.
Regulators are expected to meet soon to consider the options for Central, according to the article.
Central lost $25.5 million in the first six months of 1985, and lost $117 million between 1981 and 1984. The company diversified into real estate development and mortgage banking during the California real estate boom in the late 1970s but got caught in the high-interest-rate pinch when the market flattened.
