Columbia Sells Its Junk Bonds for $3 Billion

Beverly Hills-based Columbia Savings and Loan Assn. said today it will sell its huge junk bond portfolio to Gordon America L.P. for $3 billion, erasing some of the uncertainty surrounding the big thrift.

Financially troubled Columbia began accepting bids for its high-yield bond portfolio, the largest held by any thrift, valuing it at $3.5 billion earlier this year, although many were skeptical it could unload the holdings in a depressed market.

The sale of the bonds, which was required under new thrifts regulations, will aid the federal government in its bailout of Columbia and cut into any liability that taxpayers might have.

More than any other savings and loan, Columbia’s rise and fall has paralleled the movement of the market.

Its high-yielding junk bond investments made it the most profitable thrift in the country for a time. But when the bonds lost value, Columbia’s fortunes also plunged.

Blaming the downturn in the market over the past year, Columbia has reported $1 billion in losses and said it was technically insolvent. It went through a series of management changes as its fortunes fell.

Traders said Columbia’s deal to sell the junk bonds is a sign of market’s improving health. The wide interest in the portfolio came after some figured it would not be able to sell the portfolio at any reasonable price.

“Columbia, together with its financial adviser, The First Boston Corp., received expressions from over 50 potential investors,” said Edward Harshfield, president and chief executive officer of Columbia.