Plaza Home Mortgage Corp., Santa Ana, Calif., which has agreed to be acquired by Fleet Financial Group, said it expects a third-quarter loss of $5.8 million to $6.5 million.
The announcement raised the possibility that the merger deal may unravel.
"We believe we are on course to satisfy the conditions of the merger agreement with Fleet," said Jack French, Plaza's chairman. "However, at this time, there are no absolute guarantees that each of the many conditions to dose can be achieved given the volatile interest rate environment and other uncertainties."
Separately, Fleet Mortgage Group, Columbia, S.C., announced that it has hired Gerald L. Baker as its chairman. Mr. Baker, currently a managing director at Pasadena, Calif.-based Countrywide Credit Industries, fills a spot that opened when Andrew D. Woodward Jr. left Fleet to head NationsBanc Mortgage Corp.
In September, Fleet National Bank and Plaza Home Mortgage announced that Fleet would pay $10.125 per Plaza share, or about $120 million.
Wednesday's earnings news sent Plaza's stock sprawling. Its shares traded as low as $6.75, off $2.25, or 25%.
Plaza also announced that it expects to report a loss of $12.7 million to $13.4 million for the first three quarters of 1994, which ended Sept. 30. That loss reflects a positive restatement of first- and second-quarter results based on a favorable treatment of deferred tax liability associated with the June 1993 acquisition of Sandia Mortgage Corp.
Additionally, the company reported that, as of Sept. 30, its Plaza Home Mortgage Bank was considered "undercapitalized" pursuant to federal banking regulations. The company attributed this to a decision not to sell servicing in anticipation of the merger with Fleet.
