LOS ANGELES - Investors who lost $171 million on junk bonds purchased through the failed Lincoln Savings and Loan Association have been told they will recover 40 cents on the dollar in mid-October.
The investors' lawyer, Joseph Cotchett, said about 6 cents on the dollar has already been recovered from the thrift operation formerly owned by Charles H. Keating Jr. Mr. Cotchett said he expected nearly 100% to be repaid by the time all settlements are made.
About $251 million has been pledged to settle civil litigation by lawyers, accountants, and other associates of Mr. Keating, who controlled Irvine, Calif.-based Lincoln Savings through his holding company, American Continental Corp. of Phoenix.
After attorneys' fees and costs and a cut for the federal savings and loan bailout agency, there will be about 160 million left. Mr. Cotchett told the junk bond buyers that most of that would go to them.
Many buyers are skeptical, however. Asked about Mr. Cotchett's prediction that he would recover nearly 100% of principal, junk bond investor Phil Pontrelli replied, "I am very dubious."
Lincoln was seized three and a half years after by federal regulators at an estimated cost of $2.6 billion, making it the biggest taxpayer bailout of a savings and loan.
The junk bonds became worthless when Lincoln was seized and American Continental entered bankruptcy proceedings in April 1989. Mr. Keating was convicted of concealing Lincoln's financial situation and on July 10 was found liable along with three co-defendants for $2.1 billion in damages.