The new subsidiary that MNC Financial tapped last week to manage its $1.8 billion in problem loans and repossessed commercial real estate has sold about $100 million of property since it was formed last year.
Company officials are saying very little about South Charles Realty Corp., the unit it said will take over management of problem loans from MNC's Maryland National Bank and American Security Bank subsidiaries. Daniel G. Finney, an MNC spokesman, said that officials of South Charles and MNC have not been giving interviews about South Charles for at least several weeks.
The subsidiary has been managing about $700 million of property that MNC's banks have repossessed from borrowers unable to make payments on their loans. South Charles now will take management of more than $1.1 billion in loans, mostly related to commercial real estate, that are either delinquent or about to go delinquent.
The loans and properties belong to Maryland National and American Security. South Charles is only taking over efforts to sell them, collect on the loans or try to work out new payment plans the borrowers can meet. MNC has said only that it will "examine possible innovative ways to dispose of these assets in bulk."
Some analysts and outsiders had expected the company to take more sweeping action to address its problem loans. These observers say South Charles will have its hands full selling the assets in the depressed real estate market. Some believe MNC will try to spin off South Charles as a separate company.
"A lot of people thought it would be a 'good bank-bad bank' type of deal," said Elisabeth Albert Hayes, a banking analyst for Chapin, Davis & Co. in Baltimore. That kind of restructuring would have spun off South Charles as a separate company that would buy the shaky loans and properties from the banks -- becoming the so-called "bad bank" -- while Maryland National and American Security tried to start over without loan problems.
The most successful example of that kind of restructuring was Mellon Bank Corp.'s 1988 revival. But analysts said the deterioration of the real estate market and the "junk bond" market since 1988 would make Mellon's act tough to follow.
"There's no way you can do it," Ms. Hayes said. "You have to raise funds for [the bad bank] to buy those assets from the bank."
South Charles has about 75 to 80 professionals on staff, Mr. Finney said. "We're going to 120," he said. The group includes lawyers and other professionals, some with backgrounds outside banking.
"They appear to have a lot of good people over there," said David S. Penn, a Legg Mason Inc. analyst. "It's a lot better than other banks that have taken loan officers and made them workout people."
Felice Gelman, a Dillon Read & Co. analyst, said that putting all the bad loans into South Charles should help, even though a more far-reaching restructuring would probably help more. "You create a situation where people's lives are tied up in getting rid of this stuff," she said.
But she said the assets would have to be sold, whether to South Charles or to outside buyers, at a discount. Because no one knows how much the loans could be sold for, she couldn't say whether MNC's loan-loss reserves would be enough to cover its losses.
South Charles is headed by Bruce McPherson, formerly the chief credit officer for Maryland National Bank, Mr. Finney said. Mr. McPherson did not respond to an interview request yesterday.
Mr. Finney would not say what kind of assets the company has.
About the only indication of what types of properties the company is managing comes from advertisements in trade journals. And those provide a poor picture of what is probably in South Charles' portfolio.
The ads said that South Charles has sold several commercial properties in North Carolina, 24 apartment buildings in New York and an 85-unit garden apartment complex in Richmond, Va. But MNC has said repeatedly that most of its real estate loans and repossessed properties are in the Baltimore-Washington area.