WASHINGTON -- The government is aiming to complete its $300 million sale of Crossland Federal Savings Bank to institutional investors this week, at least a week ahead of schedule, Federal Deposit Insurance Corp. officials said.
The FDIC is hurrying to finish the deal in order to head off bids from rival New York savings banks, according to sources who work for these potential bidders.
Sources close to the negotiations claim that Harrison Young, The FDIC's resolutions director, is dead set on selling the $5.3 billion-asset Brooklyn-based Crossland to several dozen institutional investors and does not want to be sidetracked by other bidders.
"What's happened is Harrison has lined up his money and wants to pull the trigger," said a source involved in the horse race for Crossland.
A consortium of New York-area savings banks, led by Anchor Savings Bank in Northport, N.Y., sent FDIC a letter last month explaining their plan to buy Crossland's branches and spin off its assets to a workout company, according to sources.
Dime Savings Bank in Brooklyn also has talked to the FDIC about buying Crossland. Republic Bank of New York, a company that bid for Crossland 18 months ago when it was seized by the government, is also said to be mulling an offer.
Though the FDIC, Anchor Dime, and Republic are all refusing to comment officially, plenty of people are talking privately and painting a frantic behind-the-scenes picture of the FDIC's efforts to return Crossland to the private sector.
Possibly complicating matters more, the FDIC filed an amendment to its public offering on Tuesday. An explanation of the changes was not available, but they are not expected to delay the deal.
Quick Completion Sought
The FDIC announced in mid-May that it wanted to sell Crossland through a public offering. The agency released its prospectus for the deal on July 30 and said it would complete the sale in three weeks.
Finishing this week would put the deal a week ahead of schedule. Crossland failed in January 1992, and the FDIC propped it up with a $1.2 billion cash infusion. The agency has run the institution ever since.
Mr. Young refused to comment on bids by other thrifts for Crossland, but he insisted that the FDIC will consider any offers for Crossland. The agency is required by law to pick the least expensive method of resolving the failed bank.
Still, most people think the FDIC will go ahead with its sale to institutional investors.
The FDIC already has rejected two private-sector bids. When Crossland was seized on Jan. 24, 1992, the agency said offers from Chase Manhattan Corp. and Republic would cost $1.3 billion because neither bank wanted Crossland's assets. That's when the FDIC made the novel decision to operate Crossland - once the14 largest S&L in the country - until the market rebounded.
It's been 18 months, and Crossland has shed $1.7 billion in assets, pared 32 branches, and sold some subsidiaries. But the thrift has not made any money and is still burdened by $2.7 billion in nonperforming loans and troubled real estate.
Because the sale to institutional investors is unique, there is concern both within the FDIC and on Capitol Hill that the FDIC is taking an unnecessary risk. House Banking Committee Chairman Henry B. Gonzalez has already announced he will order a General Accounting Office investigation, no matter how the FDIC ends up selling Crossland.
The FDIC is expected to get the $300 million it is seeking, mainly from mutual funds.
The agency made the price made more attractive by whacking $204.9 million, or 39%, off Crossland's net worth. The prospectus puts Crossland's capital at $320 million, down from $525 million at March 31.
The paring includes $90 million in loan-loss reserve additions and writeoffs of bad assets, and an $85 million writeoff of Crossland's core deposit intangible.
When it took over Crossland, the FDIC had an incentive to bloat its capital because the more money Crossland had, the less cash the FDIC had to pump in.
But when selling the institution, it's in the FDIC's best interest to reduce its capital because that lowers the asking price.
If the FDIC gets the $300 million it is seeking from investors, the government's tab for Crossland will be $850 million, or $100 million more than the FDIC staff had predicted. But it is $450 million less than Chase's or Republic's offers would have cost, according to the FDIC's calculations.
The FDIC will assume 80% of the losses on Crossland's portfolio after its $179 million loan-loss reserve is depleted, according to the prospectus. The FDIC however, does not think Crossland's losses will exceed $179 million.
That's an optimistic assumption, considering that Crossland has $1.1 billion in nonperforming assets, or 29.6% of all loans, plus $571 million in repossessed real estate and another $435.4 million invested in restructured troubled debt.