Status Report Due on Bid to Sell Off American Savings

Amid some signs of trouble, federal savings and loan regulators are expected to announce today what progress they have made in talks to sell ailing American Savings & Loan, the nation’s second-biggest thrift, to private investors led by Texan Robert M. Bass.

M. Danny Wall, chairman of the Federal Home Loan Bank Board, confirmed that an announcement about American Savings and its parent company, Irvine-based Financial Corp. of America, would be made, but he declined to elaborate. Wall made his remarks at a news conference Wednesday in Washington where he unveiled a major rescue plan for 14 Oklahoma thrifts.

In recent days, officials close to the American Savings negotiations have privately cautioned against expecting a final deal today, pointing out that several issues still need to be resolved. They continue to maintain that a deal is close and pointed out that representatives of Bass and the bank board worked late into the night Wednesday in Washington on the proposed sale agreement.

Expressions of optimism, however, ran counter to reports sweeping the thrift industry that the deal has run into snags. Asked to confirm those reports, a federal regulator replied, “That may well be,” but he declined further comment.

American Savings is insolvent due to heavy real estate loan losses, and federal regulators have tried to find a buyer for the crippled company since early in 1987. Should more time be needed to consummate a sale, it would be the third time in three months that a self-imposed deadline has come and gone.

The Bass investors originally obtained an exclusive contract in April to negotiate the purchase of American Savings within 75 days. That contract was then extended from July 5 to Aug. 1, and then to today.

The delays have sparked growing criticism about the regulatory handling of the sale. Some skeptics have privately questioned whether the sale to Bass will ever go through, even though bank board spokesmen have indicated that only “peripheral” details remain unsettled.

“The delay after delay, it’s puzzling,” said one securities analyst in New York who asked not to be identified. “What’s a detail and what’s not? The issues that come up at the last minute can be just as much deal killers as those that came up three months ago.”

Executives at First Nationwide Bank in San Francisco, a subsidiary of Ford Motor, have begun to publicly raise questions about the propriety of the exclusive negotiating rights granted to Bass.

Ford Motor nearly bought American Savings last year, but after several tries, its efforts fell through. The company remains interested in buying American S&L;, but has been shut out of negotiations by the exclusivity clause.

“I have never understood why they granted the exclusive negotiating rights,” said Robert Lackovic, First Nationwide’s president. “The question is: Is that the best way you get the best deal? We don’t feel that gave us a fair turn at bat.”

Rep. Fernand St Germain (D-R.I.), chairman of the House Committee on Banking, Finance and Urban Affairs, has also questioned the wisdom of an exclusive contract.

“It would seem a matter of sound negotiating posture to maximize competition wherever possible,” St Germain said in a letter sent to Wall this week. He added: “it is essential that there be no appearance of exclusion or suggestion that any alternative was overlooked in any of the assistance efforts.”

A spokesman for Bass, though, defended the agreement, saying: “You don’t want to do all the roadwork and then have someone else come in and take the deal.”

The repeated delays have frayed nerves at American Savings, whose deposit base has continued to erode as talks have dragged on. The deposit drain deeply concerns Bass and his fellow investors, who feel that American Savings’ primary asset is its $15 billion in deposits and branch network system.

The deposit loss reached $337 million in July and continued through August, although the institution raised more than $500 million in new certificates of deposit through professional money brokers, a spokesman said. FCA Chairman William J. Popejoy called the CD program “a godsend” in containing the deposit-loss damage.

The delays have also created a cloud of uncertainty over American Savings’ perations and prompted an exodus of employees who have tired of waiting for a decision. Two top executives of FCA have quit in recent weeks to take jobs at other financial institutions.

“We are losing people, little by little,” a spokesman acknowledged. “There’s something about waiting and not knowing the future that causes its own kind of tension.”

Popejoy, among those most impatient with the regulatory delays, indicated that he looks forward to the day when he can leave. Popejoy has no long-term plans to stay with American Savings once a sale is completed, he said, though he will stay until his successor is in place.

“I would like to see this through to a soft landing,” Popejoy said. “But I have no intention of staying on here. I want to get this chapter of my life behind me.”

According to sources close to the negotiations, some obstacles to completing the sale are:

- Approval from regulators at the California Department of Savings and Loan, a state agency that so far has not been included in the negotiations. American Savings comes under its jurisdiction because it is a state-chartered S&L.;

William D. Davis, the agency’s chief deputy commissioner, said it may take the state “weeks” to review the deal. “We can’t do it overnight and they shouldn’t expect a blank check,” Davis said, adding that it is a “very complicated transaction” that will be reviewed “with dispatch.”

- State tax legislation intended to smooth the way for the sale, which still needs final approval. The bill, sponsored by Sen. John Garamendi (D-Walnut Grove), ensures that federal assistance to facilitate the sale is not subject to state taxes.

The Senate approved the bill Tuesday and forwarded it to the governor, who now has 30 days to sign it. A spokesman for Gov. George Deukmejian estimated that it may be “two to three weeks” before the governor has a chance to study the legislation and decide whether to approve it.

In a phone interview, Garamendi said a lobbyist for Bass in Sacramento confirmed that last-minute snags had arisen in Washington. “He said there was a question whether Ford was in or out (of the bidding), and he didn’t know the answer to that,” Garamendi said.

- A final blessing from the Internal Revenue Service, which must approve the tax consequences of the proposed reorganization of FCA and American Savings. If the sale to Bass goes through, the financial institution would be divided into a “good bank” with healthy assets and a bad bank containing at least $7 billion in questionable and non-performing assets and loans.