Imperial Expects Loss in Quarter; Junk Bonds Cited

SAN DIEGO â€”  Imperial Corp. of America, the parent of Imperial Savings of California, said it expects its third-quarter results to reflect an $80-million after-tax loss taken on the value of its $1.1-billion junk bond portfolio.

However, ICA declined to estimate what its net loss for the quarter ending today will be.

The expected loss is a result of provisions in the savings and loan bailout bill passed by Congress in August that require all S&Ls; to sell their junk bonds by 1994.

ICA spokesman Tim Larrick said the company’s interpretation of the legislation is that the S&L; must mark down to market value its entire high-yield, high-risk junk bond portfolio, which is now worth $130 million less than ICA paid for it. The after-tax impact of the loss provision will be an $80-million loss, Larrick said.

In August, before ICA decided that it had to mark down its entire portfolio, it disclosed in a regulatory filing that the market value of the bonds had decreased and that they were then worth $88.6 million less than the S&L; had paid for them. Since then, the junk bond market has deteriorated further and ICA’s portfolio has slipped in value to $130 million below its cost, he said.

ICA is in the midst of a restructuring announced in July shortly after the resignation of President Kenneth Thygerson. In his four years at ICA’s helm, Thygerson led ICA into a variety of non-traditional S&L; activities, including junk bond investments, car loans and mobile home loans.

The restructuring, done at regulators’ urging, was prompted by mounting losses and dwindling capital. ICA’s losses for the first six months of this year were $33.1 million, contrasted with a $16-million profit for the first half of 1988. The losses have been caused by loss provisions so far this year of $82.2 million, including $28.4 million for junk bond losses.