Using $271 million in loans from its subsidiary banks, MNC Financial Inc. said today it will be able to make $271 million in payments to note holders that came due today.
MNC, the parent company of Maryland National Bank and American Security Bank in Washington, also announced that it had repaid the $375 million owed to a syndicate of banks headed by Morgan Guaranty Trust Co. of New York.
In eleventh hour maneuvering, MNC received approval from federal regulators to borrow the money from its solvent banks to shore-up the cash poor holding company. But the regulators only gave their blessings after MNC agreed to make capital contributions to Maryland National and American Security in the form of its certain loan and lease assets owned by non-bank subsidiaries. These assets are worth a total of $450 million.
MNC also said it has decided to drop plans to sell MBNA America to another company and to proceed with an initial public offering of shares of common stock of MBNA Corp. The company said its ability to repay its maturing short-term obligations is "dependent upon the success of the public offering of MBNA Corp."
The stock in MBNA Corp. has been pledged as collateral on the loans from the subsidiary banks. The loans were subject to various other terms and conditions, including a floor on the offering price of the credit card company of $21 per share. The loans from the banks are due to be repaid on Feb. 4.
MBNA Corp. will be formed as a bank-holding company to conduct the credit card business presently conducted by MBNA America Bank, N.A. and certain other subsidiaries of MNC.
MNC plans to file an amendment to its registration statement, initially filed Dec. 10 with the Securities and Exchange Commission.
With 45 million shares being offered in a price range of $21 to $23 a share, the public offering could bring MNC a total of between $945 million and $1.03 billion for its credit card operations.
Alfred Lerner, MNC's chairman and chief executive, and his Cleveland-based insurance company, the Progressive Corp., plan to buy 24.9 percent of the stock of MBNA Corp., MNC announced. This purchase could cost Lerner and Progressive from $235.3 million to $256.5 million depending on the stock price.
Under the plan, Lerner intends to purchase 10 percent of the MBNA stock, or 4.5 million shares. Progressive plans to buy 2,205,000 shares, or 4.9 percent of the shares. Lerner is chairman of Progressive.
The insurance company has also applied for regulatory approval to purchase another 4.5 million shares, or an additional 10 percent of the shares to be outstanding upon completion of the offering.
MNC will use the money from the sale of MBNA Corp. to repay the loans from the subsidiary banks and additional notes of $275 FTC million due Feb. 5. and remaining debts of $107 million due on or after March 19, 1991.
Any money above an offering price above $21 per share is to be used for capital contributions to the subsidiary banks, MNC said.
The assets to be turned over to the subsidiary banks include loans and leases of MNC Credit Corp., which makes commercial loans to mid-size companies.