The waiting game at MNC Financial Inc. continued yesterday as the troubled banking company delayed announcing whether it had made a a scheduled payment of $375 million owed to a syndicate of banks.
Yesterday's deadline was for one of two big payments MNC is scheduled to make this week. MNC also is scheduled to make an additional payment today of $271 million to buy a series of variable-rate renewable notes that it sold to investors.
Should MNC not be able to make the payments to the banks or investors, the holding company could be forced to file for protection under Chapter 11 of the U.S. Bankruptcy Code. Federal regulators would then take control of the company's banking units while all depositors would be protected to at least $100,000.
"If you don't make your payment on your debt, that's what happens," said one analyst, referring to a possible bankruptcy filing. The analyst spoke on condition of anonymity, citing his company's policy.
MNC, traded on the New York Stock Exchange, closed down 25 cents yesterday, to $1.875 a share.
"The market is saying that bankruptcy is a possibility if you look at the prices of the securities that are publicly traded and the depth to which they've sunk," said John A. Heffern, a banking analyst at Alex. Brown Inc. "That clearly reflects the market's concern that the company's problems could prove insurmountable."
MNC, parent of Maryland National Bank and American Security Bank in Washington, also delayed again the start of a public stock offering for its credit-card division as it waited to file the necessary documents with federal regulators.
The company had previously planned to begin its sales pitch for MBNA America, the fourth-largest issuer of credit cards in the country, in Paris yesterday, according to a preliminary draft of the offering. The delays have cost the company thousands of printed prospectuses that were destroyed last week when terms of the deal changed.
A spokesman for MNC, Daniel G. Finney, declined to discuss the reasons for the delay yesterday, saying only that an announcement probably would be made early this morning regarding the deadline for the $375 million in bank debt.
MNC had planned to sell its credit-card division in a private transaction before the end of last year to help raise the funds needed to meet this week's cash crunch, the company said at the time the proposed sale was announced.
But when no deal materialized, the company turned to a public offering of stock in MBNA as a way to sell the profitable credit-card company.
"MNC faced a liquidity problem at its holding company and had hired an investment banker to solicit bids for the sale of MBNA American to one corporate buyer," the preliminary draft said. "The sale of MBNA to one corporate buyer has not yet been successful, and MNC cannot wait to sell the Company."
Under the terms of the public offering -- as described in the preliminary draft, which is subject to change -- MNC would sell 45 million shares in MBNA for $19 to $23 a share.
Roughly $900 million would be raised by the offering, but MBNA would keep $225 million of the proceeds to help it meet capital requirements as a separate, publicly traded company, the draft said.
Alfred Lerner, chairman of MNC and its largest shareholder, would acquire 10 percent of MBNA personally.
According to the preliminary offering, 30.6 million shares in MBNA would be sold in the United States, and 7.7 million shares would be sold overseas.
Though the "roadshow" that was planned to pitch the company to investors was scheduled to begin yesterday in Paris, the presentations were delayed pending the filing of the final prospectus with the Securities and Exchange Commission.
It was not clear whether the planned presentation in Baltimore, scheduled for tomorrow at the Center Club, was expected to proceed.