In its drive to raise much-needed cash, MNC Financial Inc. agreed yesterday to sell the assets of its equipment-leasing division to General Electric Capital Corp. and its four industrial banks in Colorado to Blazer Financial Corp.
MNC, which owns Maryland National Bank and American Security Bank in Washington, said the transactions would generate $300 million to pay off debt. The sale was the first of a handful being negotiated by MNC to generate funds.
The leasing division, with $350 million in assets, sold for $285 million, the Colorado banks for $15 million, according to sources familiar with the sales.
Yesterday's definitive agreements to sell the units came at a critical time for MNC, the region's largest banking company.
"It's a nice Christmas present," said Elisabeth Albert Hayes, a banking analyst with Johnston, Lemon & Co. in Washington.
Analysts said the announced sales could have an immediate impact. The financially troubled company, which has lost $242 million through the first nine months of this year, is expected to say today whether the sales will fully satisfy the conditions of creditors that originally required MNC to have raised $300 million by Monday.
A group of banks led by Morgan Guaranty Trust Co. granted the company a four-day extension. The new deadline -- which, if not met, could force MNC to default on $550 million already borrowed on the line of credit -- is today.
The sales agreements also should provide MNC with much-needed breathing room Tuesday, when it is forced to buy back $170 million in debt from investors.
Although it was not clear from yesterday's announcement when the money from the sales would change hands, sources said MNC is expected to use $170 million to repurchase the debt that comes due Tuesday and the remaining $130 million to pay down the amount borrowed under Morgan Guaranty's line of credit.
MNC's leasing division, begun in the late 1970s, primarily leases such things as airplanes, large computer systems, cranes, ships, railroad boxcars and tractor-trailers to large and medium-sized companies. MNC has said repeatedly that the division was profitable, but exact figures have not been disclosed.
MNC said the sale of the leasing division was expected to close before the end of the year. Lisa Van Orden, a spokeswoman for GE Capital in Stamford, Conn., said her company expected to offer jobs to about half of the 80 to 100 employees at MNC's leasing division, all but 20 of whom work in the Baltimore area.
GE Capital, a subsidiary of General Electric Co., has $63.6 billion in assets and is one of the nation's largest diversified financial-services companies.
The agreement to sell the four Colorado banks, which were purchased in the mid-1980s, has been signed with Blazer Financial Corp., a subsidiary of Great Western Financial Corp., MNC said. According to regulatory filings as of June 30, the combined banks had about $100 million in assets.
The sale of the industrial banks, which is subject to regulatory approval, is expected to be completed during the first three months of next year, MNC said.
The intention to sell the leasing division and the Colorado banks, which had been announced during the second quarter this year, represents only a small portion of the sales currently planned by MNC.
With an additional $586 million in debt coming due in two installments during next year's first quarter, analysts regarded yesterday's announcement as necessary but not complete.
"This gets them through this month, which is flash point number one out of three," Ms. Hayes said.
The largest component of the company for sale is its prized credit card division, MBNA America Bank N.A.
MNC said Monday, however, that it might try to sell the giant subsidiary in a public sale of stock for as much as $1.13 billion -- a sign that analysts took to mean the prospects for a private sale had cooled considerably.
A commercial finance unit, a second leasing division and Landmark Financial Services Inc., a consumer financing business, are also for sale.
"We're vigorously pursuing the private sale of MBNA to private bidders while concurrently pursuing the public sale," said Daniel G. Finney, an MNC spokesman. "We're aggressively pursuing the sale of those other entities as well."
Yesterday's announcement came after Wall Street had finished pushing MNC's stock still lower. The stock, traded on the New York Stock Exchange, closed the day down 25 cents a share at $3.75.
The word of the agreements also came only hours after Standard & Poor's Corp., troubled in part by the lack of any evident asset sales, downgraded the company's debt for the fifth time this year, moving it still further into "junk" bond territory.
It could not be determined last night how yesterday's announcement by MNC would affect the S&P analysis.