FCA Will File for Protection From Creditors : Meanwhile, Bass Prepares Letter of Reassurance to American S&L; Employees
Stripped of its only major asset, Financial Corp. of America in Irvine bowed to the inevitable Wednesday, saying that it plans to seek protection from its creditors in federal bankruptcy court.
The action, which had been expected, follows a move Tuesday by federal thrift regulators to seize control of American Savings & Loan and put it into receivership. American Savings, which is deeply insolvent, was FCA’s operating arm and principal asset.
The bankruptcy move represents the denouement in the story of a company that was the nation’s biggest and most profitable thrift holding company just five years ago. Its later undoing resulted from a combination of fast growth, deposit runs, soured real estate loans and rising interest rates, banking experts say.
Regulators placed American Savings into receivership this week to pave the way for its eventual sale to Texas investor Robert M. Bass, who has agreed to pump $550 million in new capital into the financial institution.
Bass Withholds Details
Federal regulators have agreed to provide a $2-billion aid package to complete the rescue, which effectively wiped out the investment of FCA’s shareholders. The company has about 12,000 shareholders of record.
Meanwhile, Bass has prepared a letter of reassurance for the 5,000-plus American Savings employees who work at offices all over California. It is the first public statement that Bass, an intensely private figure who doesn’t speak to the press, has made since the proposed sale was announced on Monday.
In the letter, Bass outlined generally what the future holds for American Savings, but he made no mention of a controversial merchant banking company that he plans to establish as an affiliate of American Savings to finance his corporate acquisitions.
That merchant banking plan is expected to draw close scrutiny in hearings today before the House Banking Committee.
Bass, while reiterating that American Savings headquarters will remain in Stockton, indicated that the company will expand its retail operations and customer products while working to restore confidence in the battered financial institution. American Savings is suffering from deposit outflows and heavy losses.
“The last few years have been difficult at (American Savings),” the 40-year-old investor said. “You have seen many of your neighbors--loyal, longtime customers--end their banking relationships with us. You have had to read and respond to an almost continuous flow of bad publicity about the company, and you have had to live with uncertainty about the (company’s) future--and yours. Beginning today, we intend to turn that around.”
FCA’s bankruptcy move was accompanied by the resignations of seven board members, including its chairman, William J. Popejoy. An eighth director is expected to resign shortly.
At the request of regulators, Popejoy has agreed to stay on temporarily as chief executive of American Savings, the country’s second-largest thrift. Merrill Butler, FCA’s asset-liquidation chief, will also stay with American Savings.
FCA said it has hired the Los Angeles law firm of Stutman, Treister & Glatt to handle the filing, adding that a bankruptcy trustee will be appointed to take care of creditor and shareholder claims.
The Chapter 11 bankruptcy filing, expected this week, will result in the suspension of principal and interest payments on FCA’s publicly traded bonds, known as debentures, the company said. FCA has about 1,000 bondholders, a company spokeswoman said.
