Deal for Fremont may fall through
A group led by billionaire Gerald J. Ford is threatening to withdraw its $80-million investment in Fremont General Corp., a Santa Monica financial holding company that regulators drove out of the sub-prime home loan business this year.
Ford agreed in May to become chairman of Fremont and its bank subsidiary, Fremont Investment & Loan in Brea, with associates Carl B. Webb and J. Randy Staff becoming chief executive and chief financial officer, respectively. But Fremont General said Wednesday that Ford had advised the company that “he is not prepared to consummate the transactions.”
Fremont shares fell 99 cents to $4.14. They are off two-thirds since the deal was unveiled.
The Federal Deposit Insurance Corp. ordered Fremont in March to quit making loans that sub-prime borrowers couldn’t afford and to cease operating with management whose “policies and practices are detrimental.”
Fremont laid off most of the 2,400 employees of its sub-prime unit and later sold its other main business, which made loans on commercial properties.
Ford, a specialist in bank turnarounds, in the 1990s consolidated First Nationwide Bank, Glendale Federal Savings and California Federal Bank into Golden State Bancorp Inc., which he sold to Citigroup Inc. for $5.8 billion in 2002.
He said in May that he would refocus Fremont on conventional consumer and commercial lending. He couldn’t be reached for comment Wednesday.
In exchange for the $80 million, Ford’s group was to have acquired preferred stock in the bank and warrants to buy common stock in the parent. The company told investors it was trying to renegotiate the deal.
Acquisitions of other sub-prime lenders have been revised as the secondary trading market for the loans has evaporated. Last week, San Diego-based Accredited Home Lenders Holding Co. accepted a $296-million buyout by Lone Star Funds after the private equity firm backed out of a $400-million deal.
--
