Lawsuits against Bank Plus Corp. of Los Angeles and problems with its subprime credit card portfolio have made success in selling it unlikely, its chief executive officer said this week.
"We've been down a long road with a number of potential suitors," said the executive, Mark K. Mason, in an interview. "But there was too much uncertainty for the acquirers."
The $3 billion-asset California thrift company owns Fidelity Federal Bank, which operates 35 branches in Southern California.
In a year of sales efforts Bank Plus officials have talked with roughly two dozen suitors, Mr. Mason has said. The aim was to sell the entire company or, alternatively, to sell its core banking operations and credit card portfolio separately in simultaneous transactions.
The company's larger shareholders have been pushing it to find a buyer since its subprime lending led to 1998 losses of $56 million.
According to Mr. Mason, who is also Bank Plus' president, one of the chief problems in trying to sell it has been its $250 million credit card portfolio. Potential buyers were offering a discounted price that would have strained the company's capital base, he said. Bank Plus finally reached "well-capitalized" levels on Sept. 30.
The company is now trying to shrink its credit card portfolio through collections and chargeoffs. It is also exploring the possibility of selling some deposits, Mr. Mason said. In effect, that would boost the company's capital base and could allow it to sell the credit card portfolio.
Bank Plus is also saddled with about 60 consumer lawsuits in Alabama connected to an affinity credit card program involving the now defunct American Direct Credit Inc. of Boise, Idaho. The suits, filed in the second quarter, claim that third-party salespeople made misrepresentations about the card. Mr. Mason said his company will fight the lawsuits if reasonable settlements cannot be reached.
But some investors still want Bank Plus to sell itself, and questioned whether it was simply dragging its feet.
A longtime critic, Jeff Gendell, general partner at New York-based Tontine Partners, said the lawsuits should have been settled quickly. He said Bank Plus' top officials are just trying to hang on to their jobs.
"This management team is using every effort to entrench itself," said Mr. Gendell, whose firm owns a 9.9% stake in Bank Plus.
Rick Nelson, general partner at LaSalle Financial Partners, a Kalamazoo, Mich., financial fund that also owns shares of Bank Plus, said he is discouraged that no buyer has been found. He urged the company's executives to keep trying.