Ex-Congressman to Head Lincoln Savings of Irvine
Former Rep. John H. Rousselot, who is leading a bid to buy Lincoln Savings & Loan, was elected chairman and chief executive of the Irvine thrift Tuesday. At the same time, Rousselot said he has renegotiated his purchase agreement with the S&L;’s parent firm.
The new deal reduces the purchase price by $88 million, to $200 million; removes four employees of Lincoln and its parent, American Continental Corp., from the investor group, and turns the deal more favorably toward Lincoln and Rousselot, who was a Republican congressman from Arcadia.
Both Rousselot’s election and the new deal struck this weekend are designed to win quick regulatory approval of the troubled sale, said Rousselot and Mark M. Connally, a spokesman for Phoenix-based American Continental.
As chairman of Lincoln, Rousselot will replace Robin S. Symes, who resigned in mid-January. As chief executive, he will replace Ray Fidel, who quit as president and chief executive Friday.
The position of president will remain vacant for now, Connally said.
Rousselot, who has been working daily on the sale with staff members of the Federal Home Loan Bank Board, said changes in management and terms were needed.
“The bank board made it clear last week that the application would not be making progress if it included members of Lincoln and American Continental,” he said. “The bank board made it clear it wanted all new people.”
Connally said Fidel, who had previously hoped to stay on with Lincoln, stepped down as part of the effort by the S&L; and its parent “to convey that we are willing to make the changes necessary” to get the sale approved.
Rousselot, who would be chairman of Lincoln after the proposed purchase, would give up his post as chief executive to a manager approved by regulators. One of the new terms, he said, is that all directors and top officers would be “pre-approved” by regulators.
Other new terms include:
* The purchase price was reduced to $200 million from $288.75 million, and the non-voting preferred stock that American Continental would get in return would not pay a dividend unless Lincoln is profitable. Charles H. Keating Jr., American Continental’s chairman, picked up Lincoln in late 1984 for $51 million.
* American Continental would put $50 million in cash or securities into Lincoln to recapitalize the S&L; and would get nothing in return. Previously, the company was to put in $15 million, two New York businessmen were to put in $35 million and all three were to receive preferred stock. The New York businessmen are no longer part of the deal.
* The new buyers would raise up to $150 million in new capital in the next 3 years. No such commitment existed previously.
* Keating and his family would personally guarantee repayment of $428 million in promissory notes that American Continental would give to acquire three major Lincoln assets: the Phoenician Resort and the Crescent Hotel, both in the Phoenix area, and a 20% stake in General Oriental Investments Ltd., run by British financier Sir James Goldsmith. The $215-million note for the GOIL stock would be paid in 3 years instead of 10 years. Other terms were tightened in a bid to persuade Keating to repay the notes earlier.
* Lincoln would be converted into a federally chartered S&L; and would return to the San Francisco supervisory district, from which it was removed last year after complaints from Keating about hostile treatment.
* Four employees of Lincoln and American Continental who were to run the S&L; are out. Rousselot has brought in new investors with no connection to the company or the S&L;, but the names are being withheld temporarily. Four of them, however, could be California businessmen who have agreed to join the board with Rousselot, who will give them the option of investing.
The four are Thomas Kemp, former chief executive of Coca-Cola Bottling Co. of Los Angeles and brother of U.S. Housing and Urban Development Secretary Jack Kemp; Edward Barker, former commissioner of the State Department of Savings and Loan under former Gov. Ronald Reagan; Jerry Niemeyer, former chairman of Sears Savings Bank, and Ralph Alfieri, an Arcadia builder and developer.
Kemp and Barker have also been appointed previously by the bank board as temporary directors of seized S&Ls.;
Keating’s stewardship of Lincoln has been marred by confrontations with regulators, particularly over his use of expanded investment powers that California law gives state-chartered S&Ls.; That law allowed him to invest S&L; deposits in hotels, in other real estate ventures and in equity stocks.
Those direct investments, as well as others, brought on a bitter and rancorous, 2-year examination by regulators, who doubted the value and wisdom of such assets. Before that examination ended last year, Keating decided that he wanted to sell the S&L; and get out of the regulated industry.
Since then, however, the company has suffered reverses.
American Continental posted a $36-million loss for the third quarter. Financial analysts are waiting for its annual filing with the Securities and Exchange Commission. That filing is due Monday and is widely expected to contain more bad news.
Lincoln operates 29 branches throughout Southern California and had $5.5 billion in assets at the end of December.
