With the renegotiation of a crucial credit line and the sale of its leasing division, MNC Financial Inc. has cleared some important hurdles. But the Baltimore bank-holding company will face more challenges in the weeks ahead.
MNC, the parent company of Maryland National Bank, yesterday announced that it has a new agreement with a syndicate of banks headed by Morgan Guaranty Trust Co. of New York. Under the new terms, MNC yesterday repaid $175 million of the outstanding balance on a line of credit and must repay the remaining $375 million on Jan. 14.
Separately, MNC also paid $170 million in notes that came due yesterday. The money for these transactions came from internal sources and the closing of the sale of MNC's leasing division to General Electric Capital Corp. While neither company would say what the leasing division sold for, the proceeds were used to reduce MNC debt by $275 million.
The sale of the leasing division was brought to a close quickly, since the definitive agreement to sell the operation was announced only last week.
The leasing subsidiary has about 70 employees, with about 60 based in Towson and 10 in offices across the country, according to MNC spokesman Daniel Finney.
Lisa Van Orden, a spokeswoman for GE Capital, said about half of the workers will be offered jobs. But she said it has not been decided whether they will have to move.
The division would become part of GE's Commercial Equipment Financing, which is based in Stamford, Conn., Van Orden said.
After the smoke cleared yesterday, MNC had paid back $345 million in debt and had received another month to repay its line of credit.
On Wall Street, the price of MNC stock jumped 50 cents a share shortly after the announcement. By the end of the day, the stock was up 25 cents, closing at $3.62 1/2 a share.
The frantic financial maneuvering of the last few days is part of MNC's efforts to recover from bad real estate loans that were the primary cause of a $241.9 million loss in the first nine months of the year.
And there are more trials awaiting the troubled company.
"It certainly is a positive development, but it certainly doesn't clear the decks as far as challenges," said John A. Heffern, a bank analyst for Alex. Brown Inc., a Baltimore investment banking firm.
Besides the $375 million that MNC has to repay Morgan, the bank-holding company also is faced with paying another $546 million in notes during the next seven weeks. To pay this $921 million tab, MNC will have to sell additional subsidiaries or work out new financial arrangements.
According to published reports, notes worth $271 million come due on Jan. 15 and the other $275 million is due on Feb. 5.
David S. Penn, a bank analyst for Legg Mason Wood Walker, the Baltimore stock brokerage firm, said yesterday's developments were good news for the company under the circumstances. "It's about as good as you could hope for," he said.