WASHINGTON -- The GE Capital Corp., one of the country's biggest financial companies, has agreed to buy nearly $1.1 billion in troubled real estate loans that the government acquired from failed savings and loans. The purchase would be the largest such bulk sale of assets so far by the Resolution Trust Corp., the agency charged with selling them.
The deal was approved by the Resolution Trust board in a closed meeting on Tuesday and is subject to the execution of a final contract in about 10 days.
In the meantime, GE Capital is trying to arrange a joint venture to share the risk of owning the assets and is talking to the Robert Bass Group, which acquired a failed savings and loan from the government in 1988.
The assets are being bought for $527 million, about 48 percent of their book value.
SG GE Capital will arrange for its own financing for the deal and will
pay cash to the Resolution Trust Corp. even though the agency has said it is willing to provide up to 85 percent financing for purchases in exchange for a share of any future profits.
The emergence of buyers like GE Capital and the Bass Group reflects a new strategy by the agency to package real estate loans in big batches and sell them to well-capitalized buyers to reduce the agency's $100 billion loan portfolio as quickly as possible.
The loans were acquired from failed savings and loans, and proceeds from the sale of the loans will be used to help recoup the cost of the savings and loan bailout, whose ultimate cost to taxpayers has been estimated at $500 billion over 40 years.
GE Capital, the financial subsidiary of General Electric Co., is becoming one of the agency's biggest customers.
Having already bought about $800 million in automobile loans, GE Capital is negotiating with the agency to buy about $500 million in commercial properties.
The portfolio that GE Capital is buying includes about 200 separate loans on properties in Western states that include California, Arizona, Utah and Colorado.