FDIC May Lose $1.7 Billion on Continental Loans

Continental Illinois estimated Monday that the Federal Deposit Insurance Corp. will lose between $1.39 billion and $1.71 billion on the $2.81 billion in poor-quality loans Continental Illinois transferred to the FDIC through Sept. 30.

The Chicago-based bank, once the nation’s sixth largest, was rescued from a 1984 run on its deposits by a $2-billion capital infusion from the FDIC and a $4.5-billion credit line from 16 banks. In addition to the capital infusion, the FDIC also agreed to assume up to $3.5 billion of bad loans from Continental.

The restructuring plan allowed the bank to transfer $2 billion of bad loans to the FDIC immediately, and up to $1.5 billion of additional loans by September, 1987.

Through Sept. 30 of this year, $806 million of the remaining $1.5 billion in bad loans had been transferred, the bank said.