Lender facing loss to forgo dividend Mo. regulators guard other Mercury assets

February 07, 1997|By BLOOMBERG NEWS

LAKE FOREST, Ill. -- Mercury Finance Co., facing a widening financial crisis, suspended its quarterly dividend yesterday as Missouri regulators moved to protect the assets of Mercury's insurance unit.

The company's shares fell 37.5 cents to $2.25 on heavy trading of 8.8 million shares. After trading in a narrow range most of the day, they fell in the final minutes of trading on word of Jayhawk Acceptance Corp.'s intent to seek bankruptcy protection. Both Mercury and Jayhawk finance car loans for borrowers with poor credit.

The cancellation of the 7.5 cents-a-share quarterly dividend is the latest blow to Mercury's shareholders. They've seen the value of their shares plunge more than 80 percent since the company said last week that it overstated earnings by $91 million during the last four years.

Mercury, which specializes in making loans to used-car buyers with bad credit, has also seen its credit rating slashed as its bankers pulled its short-term lines of credit.

Mercury's dividend, which would have been paid March 3, was authorized by the directors of the auto finance company three weeks ago. Its elimination will save the struggling company about $13.3 million.

State regulators in Missouri have moved to restrict Mercury's control of its St. Louis-based insurance subsidiary, Lyndon Life Insurance Co. It has net assets of more than $64 million.

"Insurance departments can move swiftly in times like this, and have great latitude to protect the interests of policyholders," said Steve Divine, director of the Division of Financial Regulation for Missouri's Insurance Department.

Missouri instructed Lyndon Life to inform regulators if Mercury requests any unusual fund transfers. Divine said he's also taken steps to prevent Mercury from removing officers or directors of Lyndon Life without his department's approval.

Mercury officials weren't immediately available for comment on Missouri's action.

The company is continuing to seek the financing it needs to make its debt payments.

Pub Date: 2/07/97

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