Office Of Thrift Supervision

Situation

Gordian Group advised the OTS in connection with the restructurings of both California Federal Bank ("CalFed") and Glendale Federal Bank ("GLENFED"). CalFed and GLENFED, were two large, failing savings and loan institutions. The OTS believed that the government could save significant taxpayer resources if the institutions were restructured commercially, rather than seized by the RTC. As a large contingent creditor, the government was seeking to maximize the values associated with the continuation of these entities as going concerns.

Engagement

The OTS engaged Gordian Group to provide advice with respect to implementation of its policy and economic objectives through negotiations in a commercial context. Frequently, Gordian Group needed to respond to government requests for information and recommendations on an immediate basis, given the tight time frames involved and the difficult dynamics associated with a multiple-sided negotiation involving the OTS, the institutions, existing security holders and new money participants.

Outcome

CalFed and GLENFED were successfully recapitalized through external capital infusions and compromise of preexisting debt and other claims. The intangible assets associated with ongoing lending operations were preserved, and the taxpayer was relieved of the significant potential expense that would have ensued as a result of the alternative to these restructurings — seizure.