Deadline Extended on Sale of American Savings
Federal thrift regulators have allowed themselves another month in which to consummate the sale of insolvent American Savings & Loan to Texas billionaire Robert M. Bass, officials said Friday.
The Federal Home Loan Bank Board, in a statement issued late in the day, indicated that a sale agreement is very close, but added that some details remain to be settled. The sale requires approval of the three-person board.
“These have been complex negotiations, and the staff has worked out most of the economic terms,” M. Danny Wall, bank board chairman, said. “However, there are other details to work out and documents to complete, and we as a board need time to carefully review the final recommendations of our staff.”
Wall’s statement represents a substantial step forward in the negotiations, which have been going on exclusively with the Bass investors for about 100 days. Wall set Sept. 1 as the new target date for ending the exclusive talks, extending the previous deadline of Aug. 1.
A spokesman for Bass agreed that the extension was a positive sign. “I think it’s fair to say that we continue to remain optimistic that we can bring this sale to a conclusion,” he said.
Regulators have been trying for nearly 18 months to find a buyer for American Savings, which has been rendered deeply insolvent by billions of dollars worth of troubled real estate loans. American Savings, the country’s second-biggest thrift, is the operating arm of Financial Corp. of America in Irvine.
Confirming previous news reports, bank board member Roger Martin was quoted Friday as saying the Bass investors will provide $550 million in cash as new capital for American Savings, while the deposit-insurance agency known as the Federal Savings and Loan Insurance Corp. will supply assistance valued at between $1.5 billion and $2.2 billion.
The FSLIC assistance will be cash and will be spread out over 10 years, according to Martin, who made his remarks to the Fort Worth Star-Telegram newspaper. The Robert M. Bass Group is in Ft. Worth, Tex. Martin did not return repeated phone calls Friday, and a bank board spokesman declined to confirm Martin’s remarks.
It now appears that the last major obstacle facing the sale of American Savings is passage of a bill in the California Legislature that will ensure the financial assistance that Bass and his partners receive from FSLIC is not subject to California tax. The California corporate tax is 9.3%.
Sen. John Garamendi (D-Walnut Grove), the bill’s sponsor, told The Times earlier this week that the legislation does not have a chance of passing until later next month. A hearing on the legislation is scheduled Aug. 8, said Garamendi, chairman of the Senate Revenue and Taxation Committee.
A spokesman for Garamendi said Friday that he hoped the bill would be on Gov. George Deukmejian’s desk by the last week in August. “We’ll be fast-tracking this to the extent we can but it has to go through both houses,” said Jay Ziegler, Garamendi’s press secretary. “There are no shortcuts here.”
Garamendi, whose legislative district includes Stockton, says his support of the legislation is contingent on a pledge by Bass that he will not dismember American Savings’ base of operations in Stockton, where the firm employs about 1,800 people. Bass’ lawyers are working on that pledge, the lawmaker said.
The tax bill essentially seeks to bring California tax law in line with federal tax rules on FSLIC assistance for buyers of insolvent thrifts. The assistance is not subject to federal tax.
The California Franchise Tax Board has not taxed this kind of assistance in past sales, but Bass’ attorneys apparently believe the state agency does have that power. What Bass wants, Garamendi says, is a law that codifies past state tax practices.
