task ahead of him.
Mr. Maynor, chief executive officer and president of First Union Mortgage Corp. from August of 1994 to January of this year, was dispatched this month to Sacramento, Calif., to put First Union's floundering Money Store back on course.
It is a critical task as First Union struggles to regain credibility on Wall Street.
The $2.1 billion deal last year for the home equity lender is prominent among a series of acquisitions that have yet to pan out for shareholders. As a result the stock of the Charlotte, N.C., parent company has suffered a severe drubbing, and there has even been a flurry of takeover speculation.
Money Store has missed its earnings targets, fired about 750 employees, and been through two chief executives since First Union bought it. That has fueled doubts that the unit will never be worth the purchase price.
Mr. Maynor acknowledges that Money Store looks pricey in retrospect, but he insists the market has been too quick to give up on the deal.
"We paid what we paid and thought it was -- and still believe it to be -- a fair price at the time, given the circumstances," Mr. Maynor said this week, referring to an industrywide meltdown among home equity specialists after the deal closed. "Now we have got to turn in the kind of results that support that kind of payment."
Mr. Maynor blamed the problems at Money Store on factors outside First Union's control, including a surge in interest rates and a change in accounting practices for home equity loans sold in the secondary market.
Just two months after the Money Store purchase was announced, First Union said it would take a $2.2 billion "accounting adjustment," essentially writing down the value of the unit to zero. Then in January, First Union warned that it would miss its earlier 1999 earnings target, blaming half of the difference to the accounting revisions.
Mr. Maynor said First Union is willing to continue providing cash to Money Store for as long as it needs to, and he contended that gives it an advantage over competitors.
"The other lenders that failed had financial difficulties that have really come from principles of gain-on-sale accounting which didn't provide them the necessary capital to operate their business," Mr. Maynor said. "First Union Corp. can provide the necessary cash to run this business until we build a sizable portfolio of loans."
Mr. Maynor said Money Store has been holding loans for almost a year and has several billion dollars in portfolio. He added that the company is "getting close to the position not to have to require so much capital from our parent."
On Wednesday, Money Store said that it sold its United Kingdom business and portfolio to Cabot Square Capital. That division, in London, has about 5,000 customers, and the sale price was rumored to be $516 million. In February, Cabot Square bought Cabot Financial Europe, which acquires and manages subprime credit portfolios and has about $550 million of assets.First Union is not new to the home equity sector. First Union Home Equity Bank is a nationwide company that makes loans predominantly through wholesale channels. Money Store operates through retail channels, direct-to-customer, television advertising, and direct mail.
"Think about us in terms of a retailer that would have multiple stores in a shopping center under different names, selling to different clientele," Mr. Maynor said. "It gives us a great advantage to go out and capture a good bit of this market -- and that's what we've got to figure out how to do."
Mr. Maynor's first task may be to restore managerial stability. Marc Turtletaub, 53, the long-time CEO whose father, Alan Turtletaub, founded Money Store in 1967, resigned unexpectedly in mid-May. His successor, William Templeton, served for less than three months, resigning in early August.
Mr. Maynor, 53, has been with First Union since 1968. Before heading Money Store he was executive vice president of consumer lending, a post he had held since January. Before heading the mortgage division, he was operations manager and then president of First Union Home Equity Bank. He is a former chairman of the Consumer Bankers Association home equity lending committee.
"I don't think we're dealing with something here that is broken," Mr. Maynor said. "I think we are dealing with something that just needs ... sort of like the surgeon ... a cut in the right place."
Some analysts say fiscal restraint should be Mr. Maynor's first priority. "Money Store is definitely fixable," said Steven Eisman of CIBC World Markets. "But he has got to cut costs, he's got to impose pricing discipline on the loans, take the loan volume down first and then build it back up."
With the staff already cut back, Mr. Maynor outlined a different approach. He plans to increase the employee base, working to raise loan volume over the next four to six months.
"We have to grow loan volume, not reduce it, and I don't have any plans for any dramatic reduction of employees here," Mr. Maynor said. "We need to take this business and get it back to the level of production it was at a year or two ago. Our financials are calling for substantial growth in 2000, and major cutbacks are not something we're looking at."
Henry C. Dickson of Salomon Smith Barney said that just might work. "If First Union does things well, they can establish their position in that particular product line," he said. "They have the opportunity there, but it's going to be difficult."
