In an effort to improve its sagging capital condition, Second National Federal Savings Bank announced, it has reached an agreement with a major investor to stop making cash payments on $30 million in subordinated debentures and preferred stock.
The agreement with Public Service Resources Corp., a Newark, N.J., gas and electric company, calls for the utility to accept more preferred stock instead of payments until the Maryland thrift reaches capital levels mandated by the federal government.
In turn, Second National has agreed to change the exercise price on 525,000 warrants held by Public Service from $7.50 to $2.50 per share and to issue 200,000 additional warrants to the investor. A warrant allows an investor to buy stock at a fixed price regardless of the market price of the stock.
Public Service bought $15 million of Second National subordinated debentures in 1988 and $15 million of preferred stock in 1989. Normally, a company is required to pay fixed dividends on preferred stock regardless of the performance of the business. Common stock dividends can fluctuate or be dropped.
The agreement concerning the $15 million in subordinated debentures is contingent on Second National's suspending cash payments to other subordinated debtholders, according to a press release. Negotiations with other creditors are ongoing, a release said.
The thrift, which is one of the largest in the state with $1.7 billion in assets, has 37 offices in Maryland, Delaware, Pennsylvania, Virginia and the District of Columbia. Second National's common stock sold at $2.25 a share this morning, unchanged from yesterday's closing price.
Last year the thrift lost $18 million closed yesterday at $2 1/4 , down 1/8 .
, or $2.62 a share, compared to a net income of $9.5 million, or $1.29 a share.