T. Rowe Price sells debt owed by REIT firm

August 14, 1993|By Timothy J. Mullaney | Timothy J. Mullaney,Staff Writer

T. Rowe Price Associates Inc. said yesterday that it had sold a $46.5 million debt it was owed by a struggling Pennsylvania-based real estate investment trust, closing the door on an embarrassing episode that prompted the company to cut the pay of several executives.

T. Rowe said it received $34.6 million from an undisclosed buyer for a $46.5 million debt owed from Mortgage and Realty Trust (MRT), an Elkins Park, Pa., REIT that invests in mortgages on commercial real estate. MRT has been negotiating with creditors to reorganize its finances and emerge from Chapter 11 bankruptcy court protection, which it was forced to seek in April 1990.

T. Rowe Price had originally bought about $64 million of MRT's securities on behalf of its mutual funds and private clients, T. Rowe spokesman Steven Norwitz said. But in an unusual move, T. Rowe bought the securities from its clients when the REIT defaulted on the debt in 1990 so that the mutual fund management firm would absorb the loss.

"We did it basically to remove any uncertainty on the part of the clients about the repayment of the debt, and also for business reasons, to maintain the trust and confidence of investors," Mr. Norwitz said.

T. Rowe cut the pay of Chairman George Collins, then-fixed-income boss Edward Taber and other top executives in the wake of the episode. Mr. Collins told The Sun last year that the pay cuts were MRT-related, but denied MRT prompted Mr. Taber's 1992 decision to leave.

Mr. Norwitz said about $41 million of the MRT debt was held by T. Rowe's Prime Reserve Fund, which had $4.8 billion in assets at the time. The other $23 million was in separate institutional accounts.

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