MNC Financial Inc., continuing a spate of planned asset sales, took a sizable step yesterday toward clearing its next financial hurdle by agreeing to sell its consumer finance division, Landmark Financial Services Inc., to Commercial Credit Co. for $374 million in cash.
The agreement to sell Landmark, signed early yesterday, would give MNC nearly enough funds to meet a Jan. 14 deadline when it must repay $375 million to a group of banks.
MNC, parent of Maryland National Bank and American Security Bank in Washington, said it expected the deal to be completed early next month and that it would use the proceeds to pay its debt.
"I think it's great," said John A. Bailey, an analyst with Ferris, Baker Watts in Washington. "It's life through Jan. 14."
Landmark, based in Silver Spring, was put on the block in late October, when MNC faced a potentially severe cash crunch as losses mounted and a series of large debt payments were nearing.
With $525 million in assets, Landmark has about 470 employees in 116 offices in 10 states. The company has about 50 employees in its Silver Spring headquarters and 25 in seven branches in Maryland.
Mary McDermott, a spokeswoman for Primerica Corp., parent of the Baltimore-based Commercial Credit, said it was too early to know whether layoffs would result from the purchase. "You could expect some consolidations, but how many? It's too premature to say," she said.
Commercial Credit has 400 employees in Baltimore and 27 branches in Maryland.
Yesterday's announcement came just one day after MNC announced that it had completed a crucial $170 million repurchase of notes from investors and had renegotiated a line of credit with a bank syndicate led by Morgan Guaranty Trust Co. That line of credit comes due Jan. 14.
The cash needs of MNC did not end with yesterday's announcement, however. The day after it must pay its bank lenders, MNC must pay note holders $271 million to buy back the outstanding debt. The company has about $1 billion in additional assets for sale, not including its prized credit card division, MBNA America.
Included in the sale of Landmark was about $355 million worth of consumer-finance receivables and two affiliated credit insurance companies, Guardian Fidelity Corp. and Mid-Atlantic Holdings Inc., which operates under the name IFCO.
Commercial Credit said the purchase price is $7 million more than net tangible assets.
Landmark's premium finance operation, Prime Rate Premium Finance Co., and a portfolio of real estate-related loans were not included in the sale, Commercial Credit said.
Wall Street took the news well initially. MNC's stock rose after its opening was delayed pending the announcement. However, by the end of the day, MNC closed down 12.5 cents, to $3.50 a share.
Some analysts blamed the slide on an announcement later in the day by C&S/Sovran Corp., which said the real estate market in Washington continued to deteriorate during the fourth quarter. Many of MNC's outstanding real estate loans were made in the Washington market.