Tentative Accord Could Liquidate Lincoln’s Parent

American Continental Corp.’s creditors said Friday they reached a tentative agreement with the federal government to liquidate the notorious thrift holding company and oust its controversial chairman, Charles H. Keating Jr.

If it wins court approval, the pact will provide 22,000 mostly elderly bondholders and assorted other creditors with $21 million in at least partial repayment of the $200 million they invested in the Phoenix company, which is operating in Chapter 11 bankruptcy. American Continental is the former parent of the failed Lincoln Savings & Loan in Irvine.

A representative for Keating said the executive plans to resign as American Continental’s chairman and chief executive next week to head a court-approved shareholders committee, which will take part in the Bankruptcy Court negotiations over the company’s fate.

The agreement would settle significant differences between creditors and Resolution Trust Corp., the government agency operating Lincoln.

Regulators hold Lincoln up as the epitome of everything that has gone wrong in the thrift industry. They estimate that the S&L; will cost taxpayers $2 billion, one of the costliest thrift clean-ups in the nation. Federal authorities have launched an all-out attack on Keating through a series of criminal investigations and a $1.1-billion racketeering suit against him and his top executives. Keating denies any wrongdoing.

Details of the agreement have not been worked out but are expected to be announced by Friday, when the unsecured creditors’ committee has said it will file its reorganization plan. history.

The pact provides that American Continental’s “estate will be liquidated and that those proceeds will be distributed first to the creditors,” said Michael Manning, a Phoenix lawyer for Resolution Trust. The creditors and the government also would seek the removal of Keating and all top American Continental executives.

The agreement in principle was announced in U.S. District Court in Phoenix and came as a surprise to Keating and his associates, who knew only that the creditors’ committee and the government agency had been talking for the last two months.

“RTC has simply refused to negotiate with us,” said James J. Feder, a Los Angeles lawyer for American Continental.

The agreement between the creditors and the government does not affect the racketeering lawsuit against Keating and others; American Continental’s challenge of last year’s federal takeover of Lincoln; and the lawsuits filed against Keating and others by holders of American Continental’s debt securities.

Those bondholders make up the bulk of the company’s creditors and would benefit most under the agreement. Though the bondholders’ payment hasn’t been determined, lawyers in the case said talks have put the figure at about $14 million, or nearly 7 cents on the dollar. The other $7 million would go to other creditors.

The Bondholders are mostly elderly Lincoln depositors who were persuaded to buy nearly $200 million of the parent company’s debt securities at the S&L;’s 29 Southern California branches. Many say they were misled into believing that the securities were insured or “as safe as Lincoln.