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American Express Moving to Settle With RTC Over Problem Loans

November 13, 1992

NEW YORK (AP) _ American Express Corp. is in advanced negotiations with government thrift regulators over repaying problem loans made by a real estate unit, the company confirmed Friday.

Until the settlement is reached, American Express’ Shearson Lehman Brothers Inc. securities unit is prevented from receiving new contracts from the Resolution Trust Corp. That ban sharply restricts Shearson from an active market of brokering sales of problem real estate loans and related mortgage securities.

The settlement is likely to involve millions, but a final figure hasn’t been negotiated, said a source familiar with situation who spoke on condition of anonymity.

Thrift Liquidation Alert, a Newark, N.J. newsletter which tracks the savings and loan bailout, reported in late October that American Express agreed to pay $210 million to the Resolution Trust Corp. to settle 34 loans made by its troubled real estate unit, Balcor Co. of Skokie, Ill.

Shearson spokesman Steven Faigen declined to comment on the report.

″Lehman Brothers is currently engaged in discussions with the RTC regarding the acquisitions of certain loans,″ Faigen said. ″These discussions are ongoing and it is inappropriate to comment further.″

The defaulted Balcor loans must be resolved before American Express can qualify for new RTC contracts. Balcor was heavily involved in commercial real estate loan syndications in the 1980s and was the sponsor of numerous limited partnerships.

Some of those deals involved financing from savings and loans which later failed and were turned over to the RTC for liquidation, but Balcor was still responsible for repayment. In Washington, an RTC spokeswoman said the people familiar with the Balcor case could not be reached for comment Friday afternoon.

American Express originally offered to pay the RTC $132 million to settle just 18 loans. The RTC called for a higher repayment amount and wanted settlement of 34 loans, Thrift Liquidation Alert reported.

Balcor has been drain on American Express’s balance sheet. In June 1991, American Express took Balcor off Shearson’s hands, removing the real estate unit from the brokerage’s balance sheet for a total of $1.4 billion, Institutional Investor magazine reported earlier this year.

In the second quarter 1992, Balcor added $300 million to reserves against loan losses.

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