The 67 savings bank owners of a failed New York bank clearing house are shaping up as the only losers in the company's 1995 collapse.
New York State Superintendent of Banks Neil D. Levin has asked a state Supreme Court judge for permission to pay the remainder of all unsecured claims against Nationar, a check-processing company seized by the state in February 1995.
The state plans to use more $300 million in deposits and proceeds from the sale of Nationar's remaining assets to reimburse creditors that didn't have equity in the institution.
"The only creditors whose status is up in the air are the shareholders themselves and it remains to be seen whether there will be sufficient assets by yearend to make them whole again as well," said Michael Barry, a spokesman with the New York State Banking Department.
Justice Beatrice Shainswit, the judge overseeing the company's liquidation, has set a hearing on the request for Nov. 14 in New York City.
"The next step is pretty much up to the judge now," Mr. Barry said. "Should the judge approve the superintendent's application, then the payments would proceed accordingly."
The full repayment of debts far exceeds the expectations of many of the company's savings bank and other customers, which had initially anticipated significant losses. "Superintendent Levin sees this as making good on his pledge of February 1995 to make sure that all creditors were compensated," Mr. Barry said.
"I never expected to get a nickel back. I think it's terrific," said Thomas M. O'Brien, president and chief executive of North Side Savings Bank, a shareholder that had other claims satisfied. "Equity is a sophisticated investor's risk. I'm not happy about it, but I think the department did a great job."
Mr. Barry stressed that no one has lost money in the liquidation so far, and no taxpayer money has been used in the resolution.
Nationar, formerly known as Savings Bank and Trust Co., was providing check processing and other services to savings banks, credit unions, and retailers, primarily in New York State. It processed about $90 million worth of checks daily.
The company had been losing customers for several years, however, and was struggling to remain profitable. State regulators seized the company on Feb. 6, 1995, following a run on its deposits. At the time, Nationar had $401 million in assets and a $29 million deficit.
Since then, the state has sold off the company's operations and remaining assets to pay off creditors.
In late June, state officials received court approval to pay off all debts owed to secured creditors and 40% of the debts to unsecured creditors. That payment consisted of about $153 million in proceeds from the earlier sales.