CalFed Says It Will Divest Itself of Florida Branches : Banking: The thrift still has a disturbingly high level of problem loans, and its chance of survival remains in doubt.
California Federal Bank announced plans Wednesday to sell its 43 branches in Florida and raise up to $300 million in new capital, a clear signal that the financially troubled thrift will try to remain independent for the time being.
The restructuring plan, announced after a three-month study by its outside financial adviser, confounded some observers who thought the thrift might put itself up for sale.
Los Angeles-based CalFed is the nation’s fifth-largest savings and loan, with $15.7 billion in assets. It has 168 branches in four states, including 118 in California.
CalFed has sustained significant losses in recent years--including $91.8 million in the first nine months of 1993--and just last March completed a $242-million restructuring in a bid to stay afloat. Its problem loans still stand at a dangerously high level, totaling about $850 million.
In an interview, CalFed Chief Executive Edward Harshfield said the restructuring provides the best potential return for shareholders. While the option of selling the entire thrift was studied by its investment banker, Smith Barney Shearson, no potential buyers were approached, he said.
CalFed stock has risen recently, an indication that some investors were expecting a “sell strategy,” said Bruce Harting, a thrift analyst with Salomon Bros. in New York. “I think the strategy will work over the long term, and that’s what I was expecting. But that’s clearly not what the market was expecting,” he said.
CalFed’s shares fell $.375 to $14.875 in New York Stock Exchange trading Wednesday. The restructuring announcement came after the market had closed.
The thrift intends to raise the capital through the sale of preferred stock and a rights offering to common stockholders. Harshfield said Florida branches may fetch a 3% to 5% premium on their $4 billion in deposits, or between $120 million and $200 million.
CalFed’s board hired Harshfield, an experienced caretaker of troubled institutions, after forcing out the thrift’s previous chairman and president in July.
