Burbank Airport Cashes In Gibraltar Investment

Financial managers for the Burbank Airport have prematurely cashed in a $500,000 certificate of deposit with Gibraltar Savings and forfeited 3 months or $9,300 in interest because they were concerned about the stability of the struggling financial institution.

The decision to drop Gibraltar was made last week at the semi-monthly meeting of the Burbank-Glendale-Pasadena Airport Authority, which decides how to invest the airport’s money.

“Gibraltar just happened to be one of those institutions that we think is no longer entirely safe,” said Dios Marrero, the authority’s controller.

Just a month ago, Gibraltar Savings’ parent corporation--Gibraltar Financial--said federal savings and loan regulators consider it a “troubled institution,” in “unsafe and unsound” condition. Gibraltar Savings, which is based in Beverly Hills, said its capital still exceeds the minimum amount required by regulators. A Gibraltar spokesperson said the authority’s “decision to withdraw is a judgment call on their part.”

Marrero responded that “no one at Gibraltar is going to say they have real serious problems.”

The savings and loan industry is undergoing a crisis as more and more of its members become insolvent. The institutions got into trouble mostly because of bad loans. The Bush Administration has proposed a plan to overhaul the industry. Congress says the plan will cost taxpayers more than $100 billion.

Gibraltar Financial announced last month that it expects to report a loss of $30 million to $35 million for the final quarter of 1988. If true, the company will have lost $71 million to $76 million during the year.

The Burbank airport authority bought a $500,000 certificate of deposit from Gibraltar approximately seven months ago, Marrero said. When the certificate was cashed in, Gibraltar only paid the authority 4 months worth of interest. “You lose interest when you take out a CD early,” Marrero said. “But the authority is no different than any other public party. We must make sure there is no risk to our principal. We couldn’t be sure of that in this case.”

The authority’s funds are used to pay for the daily operation of Burbank airport and any improvements that are needed.

Marrero said that the authority would continue to invest its money with some savings and loans, but only if they are in good condition. “There are still hundreds of savings and loans that are in fine shape,” he said.

But asked where the authority was investing the $500,000 that was once at Gibraltar, Marrero said, “A bank; not an S& L.”