Imperial Corp. of America Reports Capital Deficiency
Imperial Corp. of America said Monday that additional losses sustained by its already battered junk bond portfolio has resulted in a negative tangible net worth for the troubled San Diego-based parent company of Imperial Savings of California.
Federal regulators have been fully informed of ICA’s “capital deficiency” but there are no indications as yet that regulators may seize control of the S&L;, ICA spokesman Bruce Dunn said.
Tangible net worth, or core capital less good will, is one of three capital adequacy tests applied to thrifts in the wake of last summer’s S&L; rescue bill.
According to the minimum standards in the bill, ICA’s core capital is supposed to equal at least $150 million, or 1.5% of its $10.5 billion assets.
Dunn declined to specify what ICA’s negative tangible net worth now totals.
ICA’s junk bonds declined in value by $51.7 million from Sept. 30 to Nov. 30.
During its third quarter ended Sept. 30, ICA was forced to write down the value of its junk bonds by a total of $147.6 million to adhere to new regulatory standards.
The value of the portfolio is now about $860 million, down from $1.2 billion on June 30, Dunn said.
“Our earnings and capital ratios are captive to the junk bond market right now,” Dunn said.
ICA expects to realize a gain of up to $60 million by the impending sale of its credit card operation to Wells Fargo, but Dunn could not say whether the gain would push ICA’s tangible net worth back to positive.
Imperial Corp. of America also announced that it has settled five shareholder lawsuits that alleged that ICA misrepresented and made inadequate disclosures concerning asset problems that later resulted in significant losses.
The settlement to shareholders totaled $13 million, all but $500,000 of which will be paid by ICA’s insurers, ICA said.
The settlement will be paid, after of legal costs, to shareholders who purchased ICA stock between March, 1987, and January, 1989, Dunn said.
The settlement also includes the payment to plaintiffs of 1.5-million warrants for the purchase of one share of common stock.
