Shawmut National Corp. said Tuesday that it will auction $46 million, or 3.6%, of its bad assets next month.
The assets are foreclosed commercial real estate properties that have been discounted on Shawmut's books to 55 to 60 cents on the dollar.
A source familiar with the auction said Shawmut expects the properties to sell for 45 to 48 cents on the dollar.
As a result, he said, the company plans to take a special charge of $ 8 million to $ 10 million in the fourth quarter.
Shawmut spokesman Robert L. Guenther confirmed there would be a charge but declined to disclose its size. He said the company did not yet know whether the charge would have a material effect on fourth-quarter profits.
14% of Foreclosed Property Portfolio
The auction, which is to be held Dec. 12 in Cambridge, Mass., and Dec. 13 in Hartford, Conn., includes 162 foreclosed properties such as offices, industrial buildings, retail stores, land, and apartments.
The properties, which comprise 14% of Shawmut's $332.7 million in foreclosed real estate, are scattered throughout Connecticut, Massachusetts, Rhode Island, and New Hampshire.
Shawmut is selling most of the portfolio to the highest bidder. However, it can reject bids on 20 of the largest properties, worth $20 million.
The company in recent months has taken aggressive steps to shrink its portfolio of bad assets. Although it has made good progress, bad assets still account for a relatively high 9.2% of loans and foreclosed real estate. Shawmut has $23.2 billion in assets.
Prelude to Bidding on Failed Banks?
Shawmut, based in Hartford, Conn., last month announced that it had agreed to sell $75.4 million in residential properties to General Electric Capital Corp. and Shearson Lehman Brothers Inc.
Sharp reductions in bad assets are important for Shawmut if it is to be allowed to bid on the handful of banks in New England that are still expected to fail, according to an insider.