American Continental Debt Holders May Get $20 Million

Small investors in American Continental Corp.’s debt securities are close to picking up $20 million in an out-of-court settlement with the Phoenix company’s New York law firm, lawyers on both sides said Monday.

The settlement with the firm of Kaye, Scholer, Fierman, Hays & Handler could come as early as today, the lawyers said.

It would give debt holders of American Continental, parent of Irvine-based Lincoln Savings & Loan, about eight cents on the dollar. But it also would mean that a previous $14.3-million settlement with a Los Angeles law firm would be reduced to $4.3 million.

Earlier this year, the Los Angeles law firm of agreed to pay $14.3 million for its role in getting the bonds approved for sale. But the settlement included a $10-million reduction if the plaintiffs settled with other defendants.

About 23,000 holders of five debt offerings lost about $250 million when American Continental filed for bankruptcy protection in April, 1989. Federal regulators seized Lincoln the next day. The thrift now is predicted to become one of the nation’s most expensive failures ever, costing taxpayers $2 billion or more.

The biggest group of debt holders were mostly elderly Lincoln depositors who traded in their insured accounts for the high-risk, uninsured securities offered at the thrift’s 29 Southern California branches. Many allege in lawsuits that they were duped by tellers and salespeople into buying the bonds.