American Savings Says It Sold All Junk Bonds
American Savings Bank confirmed Friday that it has finished liquidating its portfolio of junk bonds, an ill-timed investment that it made just before the market for the risky securities tumbled last year.
The Stockton thrift, taken over by Texas investor Robert M. Bass in a federal bailout in late 1988, bought the high-yield bonds last spring and summer. At one point, it had accumulated nearly $500 million worth.
But fears of recession and problems with some bonds--among them those issued by the retail empire of Canadian businessman Robert Campeau, which American bought--caused the junk bond market to plunge. Also hurting the market was new federal legislation requiring that thrifts sell their bonds by 1994.
Last year, American set aside $65 million for junk bond losses and started selling its portfolio. Overall, its junk bond losses are believed to be about $100 million. An American spokesman confirmed that the thrift finished selling the bonds in April but declined further comment.
The junk bond venture was one of the few missteps for Bass in the first year he owned American, now considered one of California’s healthiest thrifts.
Even with its junk-bond problems, American earned $214.2 million in 1989, more than any other thrift in the nation.