Calfed Posts $42-Million Loss; Bondholders OK Restructuring

Calfed Inc. on Tuesday reported a third-quarter loss of $42.2 million and said that it had reached agreement with its biggest bondholders on a restructuring plan that could pump $150 million into its ailing thrift unit, California Federal Bank.

Los Angeles-based Calfed said the loss for the three months ended Sept. 30 compared to a loss of $57.1 million in the same period a year ago and $23.2 million in the second quarter. Calfed’s third-quarter loss included a $73.5-million provision for real estate loan losses.

“The company’s progress in restructuring its operations continues to be overshadowed by weakening real estate values in the company’s two major lending areas, California and Florida,” Chairman Jerry St. Dennis said.

Calfed’s losses for the first nine months of the year totaled $52.3 million, compared to $78.4 million in the same period last year.

The agreement on the restructuring plan with bondholders could lead to the thrift’s recapitalization. The plan must be approved by stockholders, bondholders and the federal Office of Thrift Supervision.

If the proposal is turned down, California Federal Bank will be unable to meet the federal government’s capital requirements and could be subject in January to OTS sanctions, including possible seizure, analysts said.

“It’s a good deal for the company because it basically frees up $150 million to pump into the thrift, and it’s a good deal for bondholders because they’re getting about $195 million worth of stocks and bonds” based on Tuesday’s closing price, said Campbell Chaney, an analyst at Sutro & Co. in San Francisco.

“It’s not such a great deal for stockholders because their equity stake would be diluted,” Chaney said. “But owning stock in a company that’s still viable is a lot better than owning stock in a company that’s facing bankruptcy.”

Calfed’s stock slipped 25 cents to $2 in New York Stock Exchange trading.

The proposal calls for bondholders to exchange their existing debentures for 79% of California Federal Bank’s stock plus $17.6 million in new bonds due in 2003. Calfed would then be merged into a subsidiary of California Federal Bank.

If the proposal is approved, the holding company would be able to bolster the thrift’s balance sheet with the $150 million that now is set aside for payments to bondholders in February.

Calfed’s existing stockholders would own about 21% of the thrift’s outstanding stock after the restructuring and would receive warrants to buy 13.8 million additional shares in 1994 for $2.10 each.

Even if the debt restructuring plan is approved, Calfed will need to raise $30 million more by next June to meet capital standards.