Glendale Federal Proposes Swap to Shore Up Reserves

Glendale Federal Bank, taking the first step in a plan to rebuild its finances, said Monday that it has reached a tentative agreement with eight investors to exchange their notes totaling $105 million for an equal amount of preferred stock.

The trade--contingent on a similar exchange with another group of note holders--would allow the thrift to add $100 million to its fragile capital, its final cushion against losses. Glendale Federal also would save $17 million a year in interest payments.

The thrift said, however, that it still will need a merger partner or a major investor to comply with federal regulations by the end of June.

Executives of the S&L; and its parent company, Glenfed Inc., would not comment on the status of any negotiations.

Industry analysts say the company is doing what it must do to ensure the thrift’s viability. Still, the future of Glendale Federal is one of the murkiest in the thrift industry as it continues to suffer from the sliding real estate market and the recession. It barely meets two standards for capital imposed by federal rules and fails to comply with a third.