Shares of Finova Group Inc. slid Tuesday as the company's third-quarter earnings, which included major asset writeoffs, overshadowed Monday's announcement that Leucadia National Corp. had agreed to invest $350 million in the company.

The stock of Finova, a Scottsdale, Ariz., commercial finance company, dropped 31.25 cents, or 11.6%, to close at $2.375. After the abrupt ending of the company's morning conference call - no questions were taken, a point of contention among analysts - its stock skidded as much as 25% before partly recovering. The American Banker index of 225 banks fell 0.2%, and its index of the top 50 banks fell 0.5%. The Dow Jones industrial average gained 1.6%; the S&P 500 index 2.4%; and the Nasdaq 5.8%.

Finova wrote off $109 million in the third quarter related to investments, repossessed assets, and equipment held for sale or lease. A gain of $19 million on sales of equities and residuals coming off lease partially offset this. The largest single writeoff was of a $54.8 million equity investment in Specialty Real Estate Finance, a resort finance developer.

"My guess is that some folks were surprised with respect to the magnitude of the writeoffs," said Fitch IBCA Inc. analyst Rui Pereira. He said he found the additional asset-quality deterioration troubling.

The company posted a net loss of $274.1 million for the quarter, compared to net income of $54.9 million the year earlier.

"Wasn't great, but wasn't as bad as it could have been either," said Stephen Moyer, an analyst at Imperial Capital LLC. "I was disappointed that management didn't articulate a clear plan to downsize the balance sheet and attempt to fund … the pending bank maturities with internally generated funds as much as possible."

Finova said Monday that Leucadia, a New York financial services holding company, would invest up to $350 million of capital in the company if Finova's bank lenders agreed to wait beyond the March 2001 deadline for their cash to be returned.

If the bank lenders don't agree to extend repayment terms and Leucadia, in response, pulls out of the deal, Finova's troubles could become dire, analysts said.

"There is a grave downside to the stock if they have to file for bankruptcy, at which point there is a reasonably high probability the stock will be worth zero," Mr. Moyer said. He estimated that the chances of this scenario playing out are 25% to 33%. Leucadia, which retreated this year from a bailout of the insurer Reliance Group Holdings Inc., has proven itself willing to walk away from situations that don't turn out the way it expects, he said.

During the third quarter, Finova began to focus on its core specialty-niche businesses. To that end, it sold its commercial services division in August to GMAC Commercial Credit LLC, a unit of General Motors Corp., for about $235 million. Additionally, it is trying to sell its corporate finance and distribution and channel finance divisions.

"I think that a lot of people have been through Finova and taken a pass - this could be its final chance to work itself out," Mr. Pereira said

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