United Companies Financial Corp. said Wednesday that it may default on more than $1.2 billion in debt, including an $850 million bank loan.

The subprime consumer finance company, which has been trying to renegotiate with the 22 banks in the unsecured credit facility, also said that a turnaround specialist would temporarily take the place of its longtime chief executive officer, J. Terrell Brown.

United Cos.' stock fell 81.25 cents on Wednesday, to $1. Like other major subprime lenders, it is having trouble righting itself after last year's liquidity crunch.

United Cos., based in Baton Rouge, La., was one of three subprime lenders that had a large unsecured credit facility. The other two, Green Tree Financial Corp. and Money Store Inc., were sold last year to Conseco Inc. and First Union Corp., respectively.

In late October, United Cos. said it had a deal with First Union, the agent bank for its loan, to turn the loan into a secured facility. It said Wednesday that those negotiations did not pan out-leaving such lenders as First Union, Morgan Guar-anty Trust Co., Bank of New York, and BankAmerica Corp., on the hook for the fully utilized $850 million.

The finance company said it anticipated that its yearend results- expected in the next few weeks-will put it in violation of financial covenants for the bank and bond debt. Analysts and other observers said that the lenders and bondholders could force the company into bankruptcy, or to sell assets, to try to recoup some of their funds.

None of the banks contacted would comment. A United Companies representative confirmed that the loan was unsecured.

The company also said that it will fail to meet requirements for $375 million of senior and subordinated notes, and that it has not had any substantive discussions with bondholders to prevent default.

The CEO, Mr. Brown, is taking a 90-day leave of absence for "personal reasons," the company said, including "possible participation in offers to purchase all or part of the company."

Capital Z, a fund partially owned by Zurich Bank, which last year purchased a stake in subprime lender Aames Financial Corp., was rumored to be in talks with Mr. Brown. A Capital Z representative declined to comment.

Mr. Brown's place will be taken by Deborah Hicks Midanek, a principal of Jay Alix & Assoc., a restructuring and bankruptcy specialist. United Companies treasurer Henry C. McCall 3d also retired earlier this week, the company said.

The $850 million bank loan was made in April 1997, when United Companies was enjoying a run of robust profits. It and others in its business were being courted by corporate finance divisions of banks offering credit lines and warehouse loans.

In the past year, these lenders have faced liquidity crunches, earnings writedowns, and rising competition, leaving banks that lent to them to renegotiate or call their loans.

"Neither the companies nor the (lending) banks had any idea what they were doing," said Reilly Tierney, an analyst with Fox-Pitt, Kelton in New York.

"Bankers are hurting from the exposure they had to this sector," said Steve Nelson, an analyst with Moody's Investor Services. "There is still a lot of negative sentiment. Since the fall a lot of these companies said things would improve, and it's not coming about."

Negotiations between United Companies and its banks have been tense, several observers said.

"This battle has been heating up," said one trader. United Companies drew down $350 million of the line in the past few weeks to have cash on hand, he said.

United Companies' inability to meet loan covenants does not necessarily mean that the banks involved will lose money, observers said. The company's assets include $1 billion of loan residuals and more than 200 branches.

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