Calfed Stock Jumps Amid Pressure to Sell : Banking: Some shareholders fear the board may ignore buyout options. A bulk sale of troubled loans is possible.
Shares of California Federal Bank rose sharply again Monday as pressure mounted for its board to sell the ailing thrift--or at least the bulk of Calfed’s problem loans.
The stock jumped another $1.50 a share, closing at $14.375, after gaining $1.375 in New York Stock Exchange trading Friday. However, that was still well below its 52-week high of nearly $24 a share.
Calfed said it is exploring several options to further lift its stock price. But Albert Fried, a former Calfed director whose investment firm owns 6.2% of the company, said he and several other big holders are worried that Calfed’s board--led by interim Chairman Michael Arthur--is ignoring potential buyout offers.
“In several conversations that I have had with Mr. Arthur, I have come away with the clear impression that his view for Calfed is to continue it as an independent full-service bank,” Fried said.
Arthur disagreed. “A sale of the bank is certainly something to be considered as one of the many options,” as is a bulk sale of Calfed’s troubled loans, he said. Arthur said Calfed is also “very close” to hiring an investment bank to help choose a course.
Even so, Fried said he and “a number of major shareholders” have hired lawyers to help them ensure that Calfed weighs all options. He declined to be more specific or identify the other holders, but one of their maneuvers might be a proxy fight for control of Calfed’s board.
With $16 billion in assets, Los Angeles-based Calfed is struggling under the weight of $1.2 billion in non-performing loans--a sizable 7.5% of its assets--stemming largely from the Southern California real estate slump.
The thrift, the nation’s sixth-largest, also made a surprise move in late July when it fired Chairman Jerry St. Dennis, whom many had credited with steering Calfed away from insolvency and toward a gradual recovery. On the same day, Calfed posted a $45.5-million loss for the second quarter.
Among the suitors that reportedly have approached Calfed is First Interstate Bancorp in Los Angeles. Arthur and a First Interstate spokesman declined to comment.
At least one analyst said selling Calfed might be a mistake for its investors. Gary Gordon of Paine Webber said a buyer would first demand that Calfed make a “big addition to its loan-loss reserves” to cover its bad loans, which would erode Calfed’s capital base and therefore reduce stock value at the time of sale.
“If you wait two or three years and work through the great majority of their loan problems, the penalty would be far less,” he said.
