FCA Reports ‘Tentative’ Talks on a Buyout : Ailing Parent of American Savings Needs $1 Billion of New Capital
Financial Corp. of America said Friday that it held discussions this week with several parties interested in acquiring the ailing company and its American Savings & Loan unit, the nation’s largest savings and loan.
However, Irvine-based FCA cautioned that talks so far have been “extremely tentative.” And industry experts said any deal would be extremely costly without governmental assistance, given FCA’s plethora of problem loans and need for more than $1 billion in new capital.
“We are publicly sharing this information at this time because we believe it is appropriate, in view of the current rumor-laden atmosphere, to publicly disclose such information--even if it only is exploratory and may not develop further,” William J. Popejoy, chairman and chief executive of FCA and American Savings, said in a statement.
FCA’s directors would consider a sale only if it provided the “appropriate amount of additional capital strength and would benefit and serve the best interests of our shareholders, customers and employees,” Popejoy added.
FCA also said it is negotiating with a possible financial adviser to represent it in merger talks.
It declined to identify the firm.
A company spokeswoman said the talks began after FCA denied Monday that any such discussions had taken place.
Speculation about a possible sale of FCA began after reports last week that the Federal Home Loan Bank Board, the chief regulator of savings and loans, is making a “top priority” of finding a buyer before Edwin J. Gray leaves as chairman in June. A bank board spokesman on Friday declined to confirm the agency’s involvement but did say that the board “encourages all S&Ls; to seek additional capital.”
Simon’s Group Mentioned
FCA officials refused to identify possible suitors, but speculation centered on former Treasury Secretary William E. Simon and former Federal Reserve Board Vice Chairman Preston Martin, Citicorp and General Motors.
Simon and Martin, through a company called HF Holdings, have been aggressively buying troubled thrifts in California and Hawaii, but an attorney for HF Holdings said Friday that the firm has had no discussions with FCA, although “we would certainly not rule out the concept” of an acquisition.
New York-based Citicorp, which already owns a California S&L;, recently bought 50 California branches from Sears Savings Bank and wants to further expand its California operations. Ford owns a California S&L;, First Nationwide Savings. GM has been adding mortgage lending and other financial services.
News of interest in buying FCA comes as it has been expanding through branch purchases and increases in deposits and fixed-rate mortgages. The company, which earned $95.4 million in 1986, also has been selling assets, cutting expenses and reducing its percentage of deposits from institutions, which tend to withdraw funds much faster than retail consumers.
But American Savings needs $1.1 billion in new capital to meet regulatory requirements. The bank board may not approve a takeover unless the buyer is willing to provide additional capital, analysts said. Alternatively, the Federal Savings and Loan Insurance Corp., an arm of the bank board that itself is seeking billions in new funds, may be forced to take over FCA, buy its bad loans or limit losses for a potential buyer.
The Senate on Friday approved legislation that would pump $7.5 billion into FSLIC, although Gray wants at least $15 billion for the troubled insurance fund.
“If there is no assistance from FSLIC, who’s going to put up $1 billion?” one investment banker asked.