Junk Bond Write-Down Responsible for ICA Loss

Imperial Corp. of America’s previously announced decision to write down the value of its junk bond portfolio was the prime factor in a $103.1-million loss for the quarter ended Sept. 30, the savings-and-loan holding company reported Thursday.

The San Diego-based parent of Imperial Savings of California said before the close of the third quarter that its $1.2-billion portfolio of high-yield, high-risk bonds was worth $130 million less than what it had paid, after accounting for previously taken loss reserves. The S&L; then said it would be forced to write down the bonds to market value because of provisions of the federal S&L; rescue bill passed last summer.

Before the third quarter ended, however, ICA’s junk bonds deteriorated further, and ICA ended up taking a write-off of $147 million, causing an after-tax loss of $92.2 million attributable to the junk bonds, it said. The S&L; parent had previously set aside loss provisions of $67 million for the bonds, bringing total loss reserves to $214 million.

Included in the quarter’s junk bond loss provisions was $11.8 million set aside to cover losses on bonds issued by Integrated Resources, a troubled financial services company. Combined with the $22 million in loss provisions set aside in the second quarter, ICA now has written off $33.8 million of the $40-million cost of its Integrated Resources bonds.

In addition, ICA set aside $33.5 million in third-quarter loan loss provisions, a pretax charge. The provisions cover expected losses on real estate and consumer loans, including auto loans serviced by Grand Wilshire Finance, which declared bankruptcy last year.

The $103.1-million net loss for the quarter contrasts with net income of $11.8 million over the same three months last year. For the year to date, ICA’s loss stands at $136.2 million, contrasted with a profit of $27.7 million for the comparable nine months last year.

In a bid to meet the S&L; rescue bill’s tougher capital requirements, ICA said previously that it planned to shrink assets by at least $2 billion in coming quarters. As of Sept. 30, ICA total assets were down to $10.96 billion from $12.3 billion Dec. 31.