Carteret Savings Bank suffered a major setback on Monday after an investor group canceled plans to inject $200 million into the ailing company.
Carteret, the biggest thrift in New Jersey with $5.2 billion in assets, did not disclose the reasons for the investor group's decision.
However, a source familiar with the deliberations of Kohlberg & Co., which heads the investor group, said it followed a detailed review of the thrift's books.
AmBase Corp., Carteret's Parent company, said in a prepared statement that it was in discussions with other investors. However, it did not identify them or indicate whether an agreement was imminent. Kohlberg & Co. declined to comment.
Shares of AmBase, which have been trading below $1 all year, closed Monday at 37.5 cents, down 18.75 cents, or 33.3%.
The thrift had a $65 million capital deficit at June 30 and the Office of Thrift Supervision has given it until the end of this month to raise its capital above regulatory minimums.
Although the OTS could give Carteret additional time to comply with capital requirements - it already has extended the deadline twice - some observers believe that investors might prefer to wait until regulators seize the institution and let the government assume its bad assets.
"It appears to me that most potential acquirers of Carteret will be looking for government assistance," said William Ferguson president of Ferguson & Co. in Dallas.
Based in Morristown, N.J., Carteret has 31 branches in northern New Jersey, nine in southern and western Florida, and one in Washington. It is AmBase's principal holding. Its financial woes are the result of overzealous real estate lending.
A Profitable Second Quarter
Ten percent of Carteret's assets were on nonpeforming status at June 30. However, the thrift earned a $3 million profit in the period, compared with a $153 million loss in second-quarter 1991.
Kohlberg & Co. was formed in 1987 by Jerome Kohlberg, one of the founding partners of Kohlberg, Kravis, Roberts & Co., the leveraged buyout firm.
The firm announced plans to invest $200 million into Carteret on July 20, in exchange for a 90% interest. The deal was contingent on a due-diligence review of Carteret's finances.
The decision to cancel the deal apparently caught AmBase executives by surprise. As of early Monday afternoon, AmBse had not yet informed the OTS that the deal had been canceled, according to an agency spokesman.
Standard & Poor's Corp. affirmed Signet Banking Corp.'s subordinated debt ratings at BB-minus. In addition, uninsured certificates of deposit and letter-of-credit-backed issues of Signet Bank/Maryland and Signet Bank/Virginia were affirmed at BBB-minus/A3.