NEW YORK — Security Pacific Corp.'s surprise decision last Friday to withdraw a $100-million note offering a day after the notes were sold was the result of an internal contretemps at the bank holding company, President and Chief Executive Robert H. Smith said Wednesday.
The decision to pull the offering at virtually the last possible moment was an embarrassment for the Los Angeles-based parent of Security Pacific National Bank. It raised questions on Wall Street about possible major problems at the company and sent the firm's stock price plummeting.
But in an interview here Wednesday, Smith said the offering was pulled because he was under a false impression until Friday that the notes were being sold through a private placement to overseas investors. When he learned from Chief Financial Officer John F. Kooken on Friday that a public offering was in progress, Smith immediately called urgent meetings with the company's lawyers, he said.
The problem was that--unknown to Security Pacific's corporate finance staff in charge of the note issue--Smith was imminently planning to announce a big expected fourth-quarter loss and a major corporate retrenchment. Smith did not say whether Kooken was aware of the impending loss and retrenchment announcement.
If the notes had been sold to the public without advance warning of the loss and restructuring, the company could have faced major lawsuits from investors and possible regulatory action by the Securities and Exchange Commission. The expected fourth-quarter loss of at least $320 million and retrenchment plans were announced publicly on Monday.
Smith said: "Until it was done, I wasn't aware that it was a public offering." He said that following the incident, new internal guidelines were immediately put in place so that any public offering must be approved in advance by Smith or another member of the company's office of chief executive. "Obviously, we don't want that to happen again," he said.