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Imperial Credit Offers to Buy Spinoff's Shares

Finance: Torrance firm proposes to spend $280 million for stock of ailing real estate investment trust.

May 14, 1999|EDMUND SANDERS | TIMES STAFF WRITER

Even as it complains about bargain hunters interested in its own stock, Imperial Credit Industries Inc. proposed Thursday buying back stock in its ailing commercial mortgage spinoff for $11 a share, or less than the real estate investment trust's current book value.

The cash offer by Torrance-based Imperial Credit comes just 19 months after it spun off the trust, Imperial Credit Commercial Mortgage Investment Corp., to investors at $15 a share in an initial public offering.

Valued at about $280 million, the buyout offer represented an 11% premium over the trust's closing stock price Wednesday. The trust's stock closed Thursday at $10.25, up about 38 cents, on Nasdaq.

Though some investors groused in Internet chat rooms that the price was too low, analysts said shareholders should not expect much better.

"Look at the company's earnings," said Charlotte Chamberlain, analyst at Jefferies & Co. "They are hemorrhaging money."

The trust announced Thursday that its first-quarter earnings sank 38% to $4.8 million, due largely to increased allowances for loan losses.

After hitting a high of $19 a share in October 1997, stock in the trust has been steadily falling, particularly after last fall's liquidity crisis in the commercial mortgage market.

"Since we took the REIT public, the investment sentiment for mortgage REITs has changed," said H. Wayne Snavely, who serves as chairman for both Imperial Credit Industries and the Los Angeles-based trust.

"Our shareholders are looking for some kind of exit and we are offering them an exit," Snavely said.

He said the trust's board of directors will appoint an independent committee to evaluate Imperial's offer and any other bids that are received.

But because of the close ties between the companies, Chamberlain doubted whether any rival bids would emerge. Imperial Credit owns 11% of the REIT.

In September, the trust rejected an $11.33-a-share offer from Portland, Ore.-based Wilshire Real Estate Investment Trust Inc. as inadequate. Snavely noted that the Wilshire deal offered stock and debt, while Imperial is offering all cash.

Stock in Imperial Credit closed Thursday at $8.20 a share, up 11 cents.

Meanwhile, Snavely said Imperial Credit is attempting to fend off its own takeover offers. Acquisition interest began to build after Imperial Credit's former parent, Imperial Bancorp, said last year it planned to sell its remaining 24% stake in Imperial Credit.

Last month, New York-based Leucadia National Corp. said it was interested in that 24% stake as part of a plan to buy a controlling stake in Imperial Credit. The deal fell through after Imperial Credit declined to sell any additional shares.

"We think the company's stock is grossly undervalued," Snavely said. "We don't want the company to be picked off at a low price."

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Times staff writer Edmund Sanders can be reached at edmund.sanders @latimes.com.

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