GlenFed Plans to Form Thrift Holding Company

Glendale Federal Bank said it plans to form a thrift holding company to give it more flexibility in buying back stock and making acquisitions.

Shareholders of the thrift would swap one share for each share of the holding company, to be called Golden State Bancorp Inc. Glendale expects the Office of Thrift Supervision and the Securities and Exchange Commission to approve the plan next month.

“This provides them more financial flexibility, it allows them to do stock buybacks, if they wish, and makes it easier to do an acquisition,” said Freedman, Billings, Ramsey & Co. analyst Claire Fleming.

Under the reorganization, Glendale Federal would become a wholly owned subsidiary of Golden State. Glendale Series E preferred stock would be exchanged for Golden State preferred, while two classes of warrants can be exercised to purchase Golden State stock.

Shareholders will vote on the change in July, the thrift said.

Glendale, one of California’s largest thrifts with 165 branches and 25 loan offices, is frequently named by analysts as a takeover target for rivals looking to boost their share of the state’s market.

The thrift is better known for its seven-year legal battle against the U.S. government, where it seeks $1.5 billion in damages related to a 1989 accounting law change in the way thrifts are valued that cost the industry millions of dollars.

The bank is presenting its case to the U.S. Court of Federal Claims in Washington and expects to conclude arguments next month and the trial by September.

With a holding company in place, Fleming said, Glendale would be able to buy back shares, though she doesn’t expect the thrift to announce a repurchase program immediately.

“This is something they’re doing for longer-term flexibility,” Fleming said.

The company said its New York Stock Exchange trading symbol GLN will change to GSB after it wins approval for the holding company.

Glendale shares rose $1.125 to close at $25.50.