In a complex transfer of assets, MNC Financial Inc...

January 16, 1991|By Peter H. Frank

In a complex transfer of assets, MNC Financial Inc. announced yesterday a plan that provided $271 million in debt payments due yesterday and could generate the funds needed to make similar debt payments due over the next six months.

The parent company of Maryland National Bank and American Security Bank also said it had paid off an additional $375 million debt that was due Monday to a group of banks.

MNC said the $271 million payment due yesterday to buy back notes held by investors was made available from a loan made by its twosubsidiary banks. Those funds, in turn, are scheduled to be paid back to the banks by Feb. 4, using a portion of at least $945 million a planned public offering of its credit card division, MBNA Corp., would raise.

Other funds from the sale of stock in the division would retire additional debt, including a $275 million payment due to investors Feb. 5.

Investment analysts generally commented positively on MNC's plan, and the company's stock closed yesterday up 87.5 cents a share to $2.75 a share.

"It's about as good as you could have hoped for," said David S. Penn,a banking analyst at Legg Mason Inc. in Baltimore. "Who's there to lend them money? Maryland National's liquid. If regulators will let them do it, why not?"

But Mr. Penn said he was left wondering about the structure and terms of some of the myriad agreements that were part of yesterday's announcement. "There's a lot of trade-offs going on and a lot of things that don't meet the eye."

According to yesterday's announcement, MNC paid a bank syndicate led by Morgan Guaranty Trust Co. of New York the $375 million due the banks Monday. MNC had made no earlier announcement of the payment, but the Wall Street Journal reported yesterday that MNC paid the banks late last week using proceeds of an earlier sale of its consumer-finance division for $369 million. A Morgan spokesman, Joseph Evangelista, declined to comment.

In announcing the $271 million payment, MNC said approval of the loans by federal regulators had involved financial safeguards to protect the interests of its two subsidiary banks.

"In connection with obtaining regulatory approvals of the loans," the company said, MNC agreed to transfer $450 million in assets from oneof its non-banking units into the two banks. The assets consisted of loans and leases formerly held by MNC Credit Corp.'s commercial division, said a spokesman at MNC, Daniel G. Finney. It was not clear how much of the infusion went into each bank, but the move should significantly bolster the banks' financial position.

Pivotal to the moves announced by MNC yesterday was the proposed public sale of stock in MBNA, its highly profitable credit-card division based in Newark, Del. Plans to sell the credit-card division were announced in late October. MNC said yesterday that it put up the stock of MBNA and the proceeds to be generated from its sale as collateral for the bank loans.

"The ability of the corporation to repay its maturing short-term obligations is dependent upon the success of the public offering of MBNA Corp.," MNC said in its announcement.

"When you look at it, it makes a lot of sense," said Elisabeth Albert Hayes, a banking analyst with Johnston, Lemon & Co. in Washington. Had MNC gone to another lender and pledged the division, she said, an unsuccessful sale could cause MNC to lose control of the credit-card unit and still not raise enough funds to meet its debts.

MNC filed yesterday morning with the Securities and Exchange Commission documents needed to proceed with the planned offering of stock in MBNA, the nation's fourth-largest issuer of credit cards. MBNA had net income of $129 million in 1990, according to the SEC filing.

Alfred Lerner, chairman of MNC and its largest shareholder, would also become chairman of the publicly traded credit-card unit if federal regulators agreed to grant an exemption from federal law prohibiting a person from holding directorships at more than one bank holding company. Mr. Finney said the Federal Reserve Board, the federal agency that regulates bank holding companies, had not issued a decision on the matter.

MNC also said that Mr. Lerner, assuming Fed approval, would serve on the two boards "until MNC Financial is restored to a sound condition but in no event longer than two years." Though it was not clear from which company Mr. Lerner would leave his post as chairman within two years, he has said that he does not intend to remain as chairman and chief executive of MNC indefinitely. MNC also said yesterday that a new chief executive officer for MNC was being actively sought.

According to the registration statement filed with the SEC yesterday:

* 45 million common shares would be offered in MBNA Corp., a newly created bank holding company, at $21 to $23 a share.

* Mr. Lerner would purchase 4.5 million shares of MBNA, a 10 percent stake.

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