Imperial Corp. Expects Quarterly Loss Due to Grand Wilshire Woes
San Diego-based Imperial Corp. of America said Friday that it expects an unspecified fourth-quarter loss because of $50 million in reserves set aside partly to cover anticipated losses linked to Grand Wilshire Finance Corp., a Glendora-based automobile finance company that in August entered federal bankruptcy proceedings.
Of the reserve total, $16 million will go to cover anticipated losses on “fraudulent and defaulted auto installment contracts” acquired from Grand Wilshire, which operated two car dealerships that prided themselves on selling cars to new immigrants.
After Grand Wilshire filed for protection from its creditors, Imperial, which had bought $174 million in loans from Grand Wilshire, indicated that all but $2 million of its anticipated losses would be covered by insurance policies.
However, the company in September later raised its possible loss level to $20 million.
Despite the expected fourth-quarter loss, Imperial, the parent company of San Diego-based Imperial Savings & Loan, expects to report “modest earnings” for the year, according to spokesman Tim Larrick. Imperial posted a nine-month profit of $30 million.
The loss reserves established Friday “will not affect the safety of customers’ deposits or the normal, daily operations of Imperial Savings’ offices,” Larrick said.
The reserve also included a $16-million loan loss provision to cover the entire amount of a loan to Global Motors, the New York-based company that has sold the rights to Yugo automobile dealerships in the United States. Yugo sales took off in 1985 when the inexpensive car was first introduced, but they soon slowed.
Imperial expects to “write down all or a significant portion” of the loan to Global, Larrick said.
Imperial also established an $18-million reserve for “certain real estate loans, principally in Colorado and Texas, corporate bonds and consumer loans,” Larrick said. About $5 million of those reserves were created to cover loss exposure created by Imperial’s portfolio of junk bonds, which now account for about 15% of Imperial’s $12.3-billion in assets.
Although the $18-million reserve will “not change our business strategies . . . Imperial will be less involved in high-yield securities” in the future, Larrick said.
Imperial agreed to create the reserves after “negotiations with the Federal Home Loan Bank Board,” he said.
