Talks Continue on Bid to Sell Ailing Thrift : Deadline Pushed Back on American Savings
Federal savings and loan regulators on Thursday extended the deadline another day in their marathon effort to arrange the sale of ailing American Savings & Loan to private investors led by Robert M. Bass, the Texas billionaire.
A statement late in the day from M. Danny Wall, chairman of the Federal Home Loan Bank Board, said “intensive” talks were continuing and no further statements would be made for 24 hours.
Those close to the negotiations say talks continued into the night Thursday, following a session Wednesday that lasted until midnight. Bass was said to be taking a direct role in talks with Wall and Roger Martin, another member of the three-person bank board.
American Savings is the operating subsidiary of Irvine-based Financial Corp. of America and the country’s second-biggest thrift. Problem real estate loans have left the financial institution deeply insolvent, meaning its liabilities far exceed its assets, and it needs billions of dollars in new capital to regain its financial health.
The 24-hour holding period announced by Wall, following nearly five months of negotiations, represented a lull in a rapid sequence of events that has turned the proposed Bass purchase into a political issue and thrown a wrench into the negotiations.
The events have also revived the hopes of Ford Motor, and its First Nationwide Bank subsidiary in San Francisco, which tried but failed to buy American Savings last year. If the Bass effort falls through, Ford Motor is prepared to make another bid for American Savings immediately, according to Robert Lackovic, president of First Nationwide.
Amid lobbying efforts by Ford, key congressmen have raised questions about how the bargaining has been conducted and what kind of deal is being discussed.
Rep. Fernand J. St Germain (D-R.I.), chairman of the House Committee on Banking, Finance and Urban Affairs, got the ball rolling when he sent a letter to Wall on Monday questioning why the bank board granted the Robert M. Bass Group an exclusive contract to negotiate the deal.
According to St Germain, the exclusivity clause prevented the bank board from receiving competitive bids from other interested buyers, including Ford Motor.
Though Bass and his partners aren’t talking publicly, it’s believed that they want to avoid a bidding war over American Savings and would break off talks if they lose the exclusivity clause.
Sen. Donald W. Riegle Jr. (D-Mich.) sent a letter to Wall on Wednesday that raised several questions that he wants answered before any sale is completed. He questioned the propriety of a plan by Bass to establish a merchant banking investment arm as a separate subsidiary of American Savings.
The subsidiary, which would have up to $1.5 billion in capital, would finance Bass’ investment activities, including corporate buyouts. “I am unaware of any previous acquisition where the new owners were permitted to use a (federally) insured institution as a vehicle for merchant banking activities,” Riegle said.
The Michigan senator also demanded that Wall detail all financial assistance from the Federal Savings & Loan Insurance Corp. needed to close the sale.
“The size of FSLIC’s obligation . . . may be larger than that reported,” Riegle said. Martin has said the sale would cost FSLIC as much as $2.2 billion in cash over 10 years.