$15.8-Million Sale of Western Empire S&L; Wins Last-Minute OK From Regulators
Regulators gave last-minute approval to the sale of insolvent Western Empire Savings & Loan to a New York merchant banking firm in a $15.8-million deal, officials said Tuesday, leaving three insolvent S&Ls; in Orange County to be closed or merged.
Castle Harlan Inc. recorded its deal with the California secretary of state’s office less than a minute before the agency’s doors closed for the year on Friday, said Robert Margolis, the S&L;'s president.
But unlike the spate of S&L; acquisitions that were approved over the past weekend, no federal assistance was involved in Castle Harlan’s acquisition of Irvine-based Western Empire.
“We’re thrilled we were able to complete the transaction,” said John K. Castle, a principal in Castle Harlan and former chief executive of the Wall Street brokerage Donaldson, Lufkin & Jenrette.
“We anticipate a substantial amount of growth to come from internal sources,” Castle said Tuesday. “We also are looking at other acquisitions of thrifts, and my instinct is that at some point we might acquire additional thrifts, including one in California.”
He said the firm has discussed with federal regulators its plans to buy certain S&Ls.;
Leonard Harlan, the firm’s other principal, said Western Empire will now be able to pursue aggressively its plans for traditional mortgage lending. The S&L; got into financial trouble when a number of large commercial and construction loans made by prior management went sour.
Harlan, whose Harlan Co. has worked with regulators to fix distressed property, is expected to help resolve remaining real estate problems at Western Empire.
Margolis and the rest of a management team that came in about 3 years ago to try to salvage the savings institution are remaining with Western Empire in their present positions. Margolis joined the new board of directors.
The sale called for Castle Harlan to give S&L; shareholders $50,000--about 21 cents a share--and pump the rest into the S&L;'s capital base. The cash infusion will allow the S&L; to grow to a $500-million savings institution from its current level of about $117 million in assets.
“I’m excited about the sale,” Margolis said. “We had confidence the deal would get done, but it took everything to pull it all together at the last minute.”
The deal had to be closed by the end of the year, he said, so that Castle Harlan could take advantage of about $6 million in tax credits available for buying the money-losing thrift.
Orange County’s remaining insolvent S&Ls; are Pacific Savings Bank in Costa Mesa, First California Savings Bank in Orange and Perpetual Savings Assn. in Santa Ana.
Wells Fargo, the San Francisco holding company for Wells Fargo Bank, still has an application pending to acquire Perpetual. The company remained close-mouthed Tuesday about the status of the proposed purchase and the reasons it wants the tiny S&L.;
Pacific Savings had been one of the regulators’ early targets for sale last year, and regulators are still believed to be negotiating with one or two possible buyers. Pacific Savings, with its small branch operation revived and its current operations under control, should still be attractive to suitors, industry sources said.
On Tuesday, regulators sent out so-called bid packages to prospective purchasers of First California. The packages, which contain detailed information about an S&L;'s condition and request bids to buy the institution, typically are sent out only after hired managers get current operations under control and evaluate the insolvent S&L;'s money-losing assets.