CalFed to Unload $800 Million in Loans : Thrifts: The troubled savings and loan says the sale of will result in a $280-million charge in the first quarter.
In a major effort to cleanse its balance sheet, California Federal Bank said Tuesday that it plans to unload $800 million in problem assets through bulk sales--a move that will result in a charge of $280 million in the first quarter.
The extent of the sale and the size of the charge were much larger than had been expected and are the final elements of a bold, but risky, restructuring plan that aims to restore the giant savings and loan to financial health.
The stock market reacted coolly to CalFed’s bulk sale plan. CalFed shares fell 75 cents to $12.50 Tuesday in heavy trading on the New York Stock Exchange.
The loans are expected to be sold at a deep discount to private investors through Wall Street brokerage houses. CalFed said the sale will result in a first-quarter loss but did not say how large it would be. The Los Angeles-based savings and loan lost more $145 million in 1993.
If the bulk sale succeeds, CalFed would join H.F. Ahmanson, Great Western Financial and other thrifts that have recently jettisoned problem loans en masse rather than take the time-consuming route of nursing delinquent assets back to health or selling them piecemeal through foreclosures.
The benefit of selling off bad loans in bulk is they clean up a thrift’s balance sheet in “one fell swoop,” said Prudential Securities thrift analyst Thomas O’Donnell.
The risk is that lenders sometimes sell the assets too cheaply. If successful though, CalFed’s move would reduce its portfolio of non-performing assets to less than 2% of total assets--down from 5.26% at the end of December.
Most of the loans that would be sold are officially categorized as non-accrual, meaning the borrowers are generally not paying back the loans.
