Chemical And Republic Weigh Offers For Citytrust
Chemical Banking Corp. and Republic New York Corp. have looked at the books of insolvent Citytrust Bancorp of Connecticut in hopes of making a federally assisted acquisition, according to a source close to the discussions.
The two New York companies are among 24 companies that attended a meeting last week organized by the Federal Deposit Insurance Corp., the source said. At that time, the agency distributed bid instructions and packages of information on Citytrust, Connecticut's most troubled financial institution.
The FDIC and Citytrust declined to comment, as did the New York banks. But the source close to the bidding process said Chemical and Republic officials have been inside the Bridgeport bank.
Although the identities of the other companies could not be learned, analysts have suggested that Chase Manhattan Corp. and Bank of New York Corp. would be interested in Citytrust's franchise. The $2.1 billion-asset company has 44 branches, concentrated in Fairfield County, outside New York City.
"It's an area of Connecticut that's desired by many banks, both in New England and in the New York area," said Gerard Cassidy, an analyst for Tucker Anthony, a brokerage firm, in Portland, Maine. "An acquisition of Citytrust would be beneficial to a bank that could do a government-assisted deal."
Fleet/Norstar Financial Group Inc. confirmed that it had looked at the company's books in January but withdrew to bid on the failed Bank of New England franchise. In winning that contest, Fleet obtained a significant Connecticut presence.
Citytrust's problems arose from a real estate lending binge in the 1980s. The company had $428 million of nonperforming loans as of March 31, representing an astronomical 23% of its $1.53 billion loan portfolio.
Its equity was wiped out by a $64 million loss in fourth quarter, and it posted an additional $34 million loss in the first quarter.
In Tuesday-afternoon trading, Citytrust shares were trading at 87.5 cents, down 6 cents. The stock's 52-week high is a meager $3.50, reflecting its long-drawnout struggle.
Although Citytrust is technically insolvent, the FDIC may have refrained from seizing it to give management time to come up with new capital.
Company officials said in April that they had asked regulators to give them some time to raise cash. Their plan hinged upon a group of seven investors -- including directors Walter Baum, Leonard J. Massello, and Ernest C. Trefz -- committing $32 million and the FDIC matching that with $32 million.
But the group failed to raise the needed funds, a source said. The three directors own 25.4% of the company's shares.
"They don't have a chance of getting the money," said Donald Kauth, an analyst for First Albany in Albany.
The Citytrust spokeswoman denied that its capital-raising plan had collapsed.
The FDIC is considering linking the sale of Citytrust to that of the troubled $1.2 billion-asset Mechanics and Farmers Bank of Bridgeport, the source close to Citytrust said. The FDIC is taking a similar tack in New Hampshire, hoping to combine two or more troubled institutions and sell them in one transaction.
Like Citytrust, Mechanics and Farmers has no equity. Its nonperforming loans equal 15% of total loans. David Sullivan, the bank's chairman, declined to comment on reports that the FDIC was mulling a joint sale of his institution. But he said that Farmers and Mechanics is searching for capital.