Bankers are complaining that the Federal Deposit Insurance Corp. is reneging on millions of dollars in bank debt through a bankruptcy sale in Florida.
Chase Manhattan Corp. and BankAmerica Corp. are expected to ask the U.S. Bankruptcy Court in Broward County next week to block a plan by FDIC liquidators to sell Cenvill Development Corp.'s 7,500-unit Century Village at Pembroke Pines. The retirement community is 65% completed.
The FDIC seized Cenvill from the failed First American Bank and Trust Co., Lake Worth, Fla., in 1989.
Key Asset Insulated
Banks are owed more than $170 million in loans to Cenvill projects. The FDIC threw Penbroke Pines into bankruptcy, shielding what is thought to be Cenvill's best asset from banks. The bank say their loans on other Cenvill projects were at least partially guaranteed by Pembroke Pines. So the FDIC proposal would deprive them of their share, they say.
Adding to bankers' ire, the buyer, CV REIT Inc., a West Palm Beach real estate investment trust, is controlled by H. Irwin Levy. He is the developer who sold Cenvill to First American in the first place.
The case is an extreme example of the catch-22 regulators often face when liquidating a failed bank, a spokeswoman for the FDIC said. "That's tight-rope we walk all the time," she said. "We want to get it back in the private sector as quickly as possible, but we don't want to dump it in the market."
Decline in Value
Cenvill's net worth nosedived the first year after the FDIC closed First American Securities and Exchange Commission documents show a $155 million loss in 1990 as the company's net worth plummeted to negative $30 million from $125 million.
The largest portion of the loss is attributed in the SEC 1990 filling to "the company's determination that [real estate and other] assets are expected to be disposed of by sale, transferred to lenders, or otherwise, and reflects what management expects, based on current market conditions and the company's business plan, to be the ultimate realization."
The FDIC spokeswoman said the agency had "never been satisfied" with accountants' explanations for the sudden drop in value that turned up in the 1990 annual report. But the agency believes the earlier management had inflated value by counting planned projects as part of its net worth, she said.
Some bankers charge the FDIC mismanaged Cenvill. "Two years ago, this company could have been salvaged," said one source in the bank group.
Scott L. Baena, a lawyer for Cenvill, denied mismanagement by FDIC, saying the company had continued to build and market its projects.
One of the bankers conceded privately that the apparent collapse of Cenvill might be a result of "more realistic accounting" after the FDIC took over. But another bank representative said a $155 million error would have been hard for a publicly traded firm like Cenvill to have hidden.
Mr. Levy argues his offer for the Pembroke Pines Community is more than that project is worth.
The $60 million purchase price counts settlement of a $48 million loan by CV REIT to the Pembroke project, an $8 million loan by Daiwa Bank to the project, and a $2.8 million note to Cenvill.
"We're financing a company that might have a good chance [of repaying the loan], but not without management," Mr. Levy said.
Using figures provided by Mr. Levy, the price for the one development is about $5 million to $10 million less than First American paid for the whole company in 1984.