SAN FRANCISCO -- The board of Glendale, Calif.-based Citadel Holding Corp. has approved a sweeping restructuring plan that includes selling problem assets and spinning off a majority stake in its thrift unit to new investors.

The plan, crafted under pressure from regulators, is aimed at cleaning up loan problems and recapitalizing the thrift, Fidelity Federal Bank. Citadel, which has $4.1 billion in assets, has lost $82 million since 1992.

In January the company announced it was pursuing a restructuring plan. Last month, the company noted that it could run out of cash and fall short of regulatory capital standards if it failed to complete the restructuring.

The plan is designed to raise the thrift's core capital above 5% of total assets.

Analysts said that, like similar California thrift reorganizations, Citadel's plan will sharply dilute the holdings of existing shareholders.

Citadel's remaining assets will include real estate and its minority share in Fidelity Federal, with a combined worth estimated at $9 per share. That compares with Citadel's book value of $25.99 per share at the end of March.

The company is under pressure from regulators to raisecapital.

The company's stock was trading at $5.62 per share at midday Friday, down $1.25.

In the thrift spinoff plan, Fidelity Federal will hold a private stock offering of at least $110 million, trimming Citadel's stake to less than 25%. Citadel's adviser, J.P. Morgan Securities, is acting as a placement agent for the stock, which is expected to be offered at $5.25 per share.

Citadel will keep the company's Glendale headquarters building, which is valued at about $10 million.

The latest restructuring plan differs from previously announced versions in its asset cleanup strategy.

The company originally said it intended to transfer problem assets from the thrift to the holding company as part of a plan to turn Citadel into a real estate management concern.

But under the revised plan, Fidelity Federal will sell in bulk $490 million in real estate assets, reducing nonperforming loans and foreclosed property to less than 1% of total assets from 6.46% at the end of March.

Analysts said the change reflects the strong prices received by sellers in recent bulk sales of California real estate.

Citadel said it will buy $24.5 million of assets in the bulk sale, permitting it to pursue a scaleddown version of its real estate management plan.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.