$100 Million in ‘Net-Worth Certificates’ : Regulators Aid Ailing Central S

SAN DIEGO —  Federal regulators on Monday issued more than $100 million in “net-worth certificates” to financially troubled Central Savings & Loan, immediately giving the company a positive net worth--on paper--for the first time in more than a year.

Central, with $2.3 billion in assets and a negative net worth of more than $95 million at the end of the first quarter, is “a much more viable organization and much closer to a resolution of its problems” because of the action, according to George Leonard, Central’s newly appointed president and chief executive.

On May 31, First Federal Savings & Loan of Arizona, of which Leonard is executive vice president, was given a 90-day contract to manage Central after federal regulators forced the resignation of Central’s board.

Although no currency changed hands Monday, the net-worth certificates give Central a positive net worth on paper and make the company more attractive to a potential buyer, Leonard said.

Since 1982, regulators have used certificates to rescue dozens of ailing S&Ls;, which must eventually reimburse the government. These certificates will be shown on Central’s balance sheet as subordinated debentures.

Leonard confirmed Monday that at least one of the companies that had expressed interest in acquiring Central is still interested. Officials of American Capital Corp. of Miami are still “asking for different pieces of information” about Central, Leonard said. He added that “I’m not sure we’re interested in buying it at this time, but we’d certainly consider an extension of our management contract.”

Central had been under “supervisory review” by the Federal Home Loan Bank Board before the regulatory action in May and had been unable to make any new loans or dispose of any holdings without federal approval.

Central will soon make loans again, Leonard said. “We’re working on plans for (resuming) lending, (but) we’re still trying to get our arms around this big monster,” he said.

Central lost $11.9 million in the first quarter ended March 31.

Central, with 48 offices in Southern and Central California, branched out into real estate development and mortgage banking during the state’s real estate heyday in the 1970s. But the company later got caught in the high-interest-rate squeeze that followed.