First RepublicBank Says It May Default on $33 Million
DALLAS — Ailing First RepublicBank Corp., a major bank holding company that recently received a $1-billion federal bailout, said it expects a significant first-quarter loss.
The Dallas-based company also reported Wednesday in documents filed with the Securities and Exchange Commission that it may default on about $33 million in long-term debts, a move which could prompt creditors to demand immediate repayment.
“These factors, among others, indicate that the corporation may be unable to continue in its present form,†First RepublicBank said in a draft of its annual report to shareholders filed with the SEC. Shareholders have not yet received the report.
First RepublicBank is not related to First Republic Bancorp of San Francisco.
Meanwhile, two class-action suits have been filed by investors against the company and seven of its top executives in federal district court in Dallas.
$500-Million Loss
First RepublicBank, Texas’ largest bank holding company and the 13th-largest in the nation, said it expects a “significant loss†during the first quarter of 1988. Company insiders expect the loss to exceed $500 million.
The loss was caused by major deposit outflows, increases in funding costs and in problem loans, especially in real estate.
The company received a $1-billion bailout from the Federal Deposit Insurance Corp. on March 17.
In giving the aid, FDIC said no protection was offered for First RepublicBank’s creditors and shareholders. At the same time, the company suspended dividend payments to holders of preferred shares.
Angry Investors
The two-class action suits accuse First RepublicBank of misleading investors about the company’s financial health.
The investors allege misrepresentation and fraud in the sale of securities issued before RepublicBank Corp. acquired InterFirst Corp. last June.
In the first suit, New York investor Martin Theodores claims that he and other investors saw the value of their First RepublicBank securities plummet after the company’s bailout request. He claims that investors weren’t adequately informed about First RepublicBank’s condition and the possibility that the company would seek federal assistance.
First RepublicBank spokesman Joe Bowles declined comment on the litigation.
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