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Chase Manhattan Files Suit Against Citadel Holding

March 15, 1994

Citadel Holding Corp., the Glendale-based parent of troubled Fidelity Federal Bank, said Chase Manhattan Bank of New York has filed a lawsuit against it in an attempt to block a plan by Citadel to restructure Fidelity.

Citadel wants to dispose of nearly $482 million in assets, mainly troubled real estate holdings. At the same time, Citadel would sell Fidelity to another financial institution or group of equity investors, who would then recapitalize the savings and loan. Citadel, with assets of about $4.4 billion, says the restructuring needs to be done by mid-year, when it is likely to run out of cash.

But Chase Manhattan, in a lawsuit filed March 4, says Citadel's plan violates a 1990 loan agreement between the two institutions. Chase Manhattan is one of four lenders under Fidelity's $60-million subordinated loan agreement. Chase officials declined comment.

Citadel, which last week reported a fourth-quarter loss of $37.5 million and a loss of $67.2 million for 1993, said that Chase's lawsuit is without merit and that it does not have to prepay debt that it owed to Chase and other banks.

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