Lomas Financial Corp.'s proposed sale of its remaining servicing assets to First Nationwide Bank, saying creditors deserve time to seek a better offer. Handing down his ruling at a 45-minute hearing, Judge Peter J. Walsh said Lomas's management failed to give creditors sufficient time or information to vote on the sale, which was announced last month. The planned sale would have given First Nationwide a $20 billion servicing portfolio for a below-market price of $150 million. "This company belongs to the creditors and they have a paramount right to exercise their judgment," Judge Walsh said to a courtroom audience of about 30 people, most of them lawyers and creditors. The judge said the creditors' right to seek the best price outweighs Lomas's concern that the servicing portfolio will only deteriorate in value if the sale collapses. He added that the creditors' committee was given inadequate time to digest the 150 pages of information about the sale. The ruling reopens the bidding for the Lomas servicing portfolio, which has been on the auction block since March 1994. The bankruptcy court has been deliberating since Monday on the plan by Lomas - once the nation's preeminent home-mortgage lender - to liquidate its assets. The company declared bankruptcy last month, having emerged from a bankruptcy reorganization in 1992. During this week's proceedings, it has come to light that Mellon Bank Corp., PNC Bank's mortgage unit, Source One Mortgage Co. and Atlantic Mortgage Co. have expressed interest in looking at and possibly buying the servicing portfolio in question. Lomas' creditors were visibly pleased with the ruling. "There was never a real auction for the assets," said one member of the creditors' committee who attended the hearing and spoke on condition of anonymity. "Now we have a chance." He added that he and other members of the creditors committee believe they could get more than the $150 million First Nationwide agreed to pay. The four interested parties have already begun due diligence, he said. Bob Levine, a lawyer at Davis, Polk & Wardwell, New York, who represented Lomas at the hearing, said the company's paramount concern was the risk involved in delaying the sale, which might result in a decline of the portfolio value. "The company believed it was in an emergency situation and did the most it could to get the best offer," Mr. Levine said. He said the company is still concerned that a further delay will reduce the value. Following the hearing, Eric Booth, chief executive of Lomas, shook hands with the creditors, and said he was ready to work with them to sell the assets. First Nationwide, owned by financier Ronald O. Perelman's MacAndrews & Forbes Holdings Inc., bought some $4.6 billion of Ginnie Mae servicing from Lomas in August. That deal is expected to close later this week, Mr. Levine, the lawyer representing Lomas, said.
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