THRIFTS : Eight Interested in Columbia Portfolio : Junk bonds: In a separate announcement, the troubled S&L; says it is being investigated by the Office of Thrift Supervision.
Columbia Savings & Loan, struggling to survive amid the recent plunge in its junk bonds, has narrowed to eight the potential buyers of its troubled high-yield portfolio, sources close to the thrift said Friday.
Separately, the Beverly Hills-based thrift disclosed in a public filing that the federal Office of Thrift Supervision is conducting an investigation that “parallels” a probe of Columbia being conducted by the Securities and Exchange Commission and the U.S. Attorney’s Office. Columbia said the investigation is being done “from a thrift regulatory standpoint.”
The parties interested in buying Columbia’s junk bonds generally include groups of investors, the sources said. Interested investors include the New York banking firm Bankers Trust, the wealthy Pritzker family of Chicago and General Electric Capital, the Stamford, Conn.-based finance arm of General Electric.
Columbia, whose collection of junk bonds and certain preferred stock was worth $2.9 billion on March 31, declined to comment Friday. So did its former chief executive, Thomas Spiegel, who is helping to sell the bonds.
Representatives for General Electric Capital and Bankers Trust also declined comment. Pritzker representatives could not reached.
Columbia was the largest investor among savings and loans in risky junk bonds, which pay holders high interest to compensate for additional risk. Last year’s thrift bailout bill required Columbia and other S&Ls; to sell their bonds within five years.
Within the past year Columbia’s junk bonds have fallen by some $1 billion in value because of recession fears, financial problems suffered by issuers and other factors. As a result, Columbia has posted heavy losses, is now insolvent and risks seizure by regulators unless it can unload the junk bonds and bolster its capital position.
Columbia disclosed in March that its entire portfolio was for sale. Investor interest is said to have picked up in recent weeks because the junk bond market has recovered somewhat. Whether regulators approve any sale, however, depends largely on how the deal is financed, something Columbia alluded to in a recent public filing with the thrift regulatory agency.
Columbia has said it would finance any transaction, thus allowing buyers to put up less cash. Regulators, however, are said to be adamant that Columbia demonstrate that any such financing deal carry no risk of default.
Regarding the OTS investigation, Columbia said it is “in the very early stages.” It also said the probe “relates to certain expenses and activities of former association officers.”
SEC investigators and prosecutors are known to be looking at whether Drexel Burnham Lambert, the Wall Street firm that collapsed earlier this year, and Michael Milken, its former junk-bond financier, improperly induced thrift officers into buying certain junk bond issues. They also are said to be interested in business dealings between Milken and Columbia executives.
As previously reported, Columbia paid $4 million in bonuses to senior executives last year desite losing $591.1 million. In addition, Spiegel, who left Columbia Dec. 31, paid back $600,000 of his 1988 compensation last November after regulators complained that it was excessive. Sources said, however, that the investigation does not center on the bonuses.
OTS officials declined to comment on the investigation.