Glenfed Inc. is making a ninth-inning move to sweeten terms of its $425 million recapitalization in order to overcome Wall Street skittishness.
Potential investors backed away from the initial proposal after California Federal Bank and several other major California thrifts posted hefty second-quarter losses, Glenfed officials said. Glenfed itself lost $29.9 million in the period.
On Thursday, the Glendale-based thrift trimmed the price of common stock to be issued in a rights offering from $10 to $9 a share. Investors can now buy shares at about 59% of the company's tangible book value, down from 65%.
But the nation's fifth-largest thrift company is scrambling to keep other stakeholder groups from jumping ship. Opposition from bondholders or preferred or common stockholders could block the recapitalization.
"In order to get new investors to come in, we've had to give them a little bit more," explained Richard A. Fink, Glenfed's chief legal officer. "That's got to come out of the other constituents."
The stakes are enormous. Federal regulators have given Glenfed until the end of the month to complete its recapitalization or face a takeover.
Goal of $250 Million
Glenfed, which has $17.9 billion of assets, has proposed a far-reaching plan that includes raising $250 million through the rights offering. While the subscription price is now $9 per share, various enticements, including stock warrants, could reduce the real cost to as low as $8.
Bondholders, meanwhile, have a new offer of about 52 cents in stock and other payments for every $1 of debt they hold, down from 57 cents, Mr. Fink said. Preferred stockholders would recover around 57 cents on the dollar down from more than 60 cents. Common shareholders would suffer additional dilution because they would receive new shares worth less than the amount provided under the original proposal.
Given that bankruptcy is the alternative to accepting the new terms, the old stakeholders probably will accept them. "We still think it's a good transaction," said Cary J. Stanford, a lawyer who represents bondholders.