First American Financial Restructures Debt : Banking: Holding company erases three ‘demand’ or ‘callable’ loans, which regulators have criticized.

SANTA ANA â€”  First American Financial Corp. said Wednesday that it has restructured $65 million of its debt to remove a type of loan that banking regulators have criticized.

The holding company for First American Title Insurance Co. said the new secured loan from a consortium of lenders erases three unsecured notes known as “callable� or “demand� loans.

Lenders with callable loans can require that borrowers repay their debts at any time during the terms of the loans.

Under pressure from regulators skeptical about real estate, banks have been calling in loans made to real estate developers and others in the industry, said Jack H. Derloshon, vice president and chief financial officer of First American.

Those actions have wreaked havoc in the industry, and First American wanted to remove itself from such a threat, even though it was not worried that its banks would demand early loan payoffs, Derloshon said.

At the same time, the company took a big step in its yearlong effort to eliminate its heavy reliance on borrowings. At the end of March, 1991, the company’s debts had grown to $110 million, or about 80% of its shareholders’ equity, instigating the debt-reduction plan. By the end of December, it had reduced that ratio to 67%.

Under the terms of the new loan, First American will repay $55 million within 5 1/2 years and the remaining $10 million in the next 1 1/2 years, Derloshon said.

The repayment should have little effect on the company’s net income, he said.

Chase Manhattan Bank in New York led the consortium of six banks and an insurance company. Three of those banks--First Interstate, Imperial and Sanwa--were the lenders that had made the callable loans to First American.

Analysts applauded the company’s move. “First American was pushing the upper limit of the debt-to-equity ratio,� said Bob Coleman, an analyst at Dominick & Dominick Inc. brokerage in New York. “Being shareholders, you would like to have the financial security that comes with no debt.�

Coleman said it is usually necessary to borrow money for such major transactions as acquisitions, but he cautioned that such debt should be repaid as soon as possible.

“Shareholders should applaud that First American now has a game plan to reduce its debt in seven years,� he said.

News of the debt restructuring, though, barely affected the prices of the company’s two classes of common shares. Its Class A stock, which carries full voting rights, fell 75 cents a share Wednesday, to $15.75 a share. Its Class B stock, with diluted voting rights, gained 25 cents a share, to close at the same price, $15.75 a share.