Nationar's creditors could lose almost $30 million once the state regulator finishes selling the failed check clearing company's businesses and evaluates all claims, according to a financial report from the New York State Banking Department.
As of Feb. 6, when the state-chartered trust company was seized by regulators after a liquidity crisis, Nationar had $401 million in assets and a $29 million deficit, according to a financial statement filed with the report.
At least some of the hit is expected to be absorbed by the thrifts that had deposits at Nationar.
The company has since sold off almost all of its securities that were subject to reverse repurchase agreements, reducing its footings by about $200 million, the report said.
No specific figures were released about the current debt or how much creditors could recover.
With about $230 million in liabilities remaining, however, that would leave creditors losing about 13 cents on the dollar if all creditors' claims had equal priority.
Claims against Nationar have been estimated, but Superintendent of Banking Neil D. Levin cautioned in a report to the state's supreme court last week that the final deficit, and the "potential creditor recoveries," could change from the Feb. 6 figures.
Possible changes in the balance sheet could arise from asset sales above or below book value, the total number of claims filed against Nationar, the outcome of the claims reconciliation process, the evaluation of collateral, and the review of priority claims.
The state is still seeking buyers for $40 million in loans to employee stock option plans and the company's investment services. Mr. Levin didn't estimate when the liquidation would be completed.
"It's still not clear how serious the eventual hit might be," said Steve Rice, spokesman for the Community Bankers Association of New York State, the thrift trade group.
According to a source in the state's thrift industry, most of the depositors have been speculating for "a long time" about how much money they'll recover. The source said he assumed that most thrifts are expecting some kind of "haircut" off their deposits.
The superintendent is drawing up procedures for creditors to reclaim their money and expects to seek court approval shortly. Mr. Levin said in a press release that he will ask the court for a date in early August as the deadline for filing claims.
The department is exploring ways to make special interim distributions for creditors facing their own liquidity needs.
In addition to the statement, Mr. Levin also filed with the court an interim report summarizing the history of the state's actions in respect to Nationar and the department's efforts since the seizure to sell off the company's assets.
According to the report, state officials concluded after the 1994 examination that Nationar's continuing losses required "immediate attention" and they closely monitored the situation. Officials determined in late January 1995 that the withdrawal of key shareholders as customers was creating a loss of confidence in the company and a liquidity crisis.
Nationar was seized after state officials met with company officials and the largest shareholders, but failed to craft a solution to bail out the company.
