UPDATE 2-Corus to defer interest payments; seeks TARP money
(Recasts, adds details, background, share movement)
Nov 18 (Reuters) - Struggling real estate lender, Corus Bankshares Inc CORS.O said it will defer interest payments on $404.6 million of junior subordinated debt as it seeks to conserve cash amid the current financial turmoil.
Corus, battered by its exposure to the once popular condominium loans, also said it has also applied for funds under the U.S. Treasury's Troubled Asset Relief Program Capital Purchase Program, but is yet to receive any response.
"The decision to defer interest payments is one that both management and the Board took quite seriously, and was made after substantial and careful consideration of the challenges current market conditions pose for the Company," CEO Robert Glickman said.
The Chicago-based lender has suffered in the recent past due to its heavy exposure to commercial real estate construction and development loans.
Most of the loans were made to build condominiums in areas which are amongst the worst affected by the housing crisis, including Florida and Atlanta.
As of Sept. 30, Corus, which has 76 percent of its loan portfolio in condominium construction, had $113 million of cash, $51 million of which is earmarked for capital contribution to CorusBank.
Corus was one of the active lenders to developers during the condo construction boom. The bank had $5.21 billon of condominium loans outstanding at September 30. It originated $1.2 billion of new loans in the first half of 2008.
For the third quarter of 2008, Corus posted a net loss of $128 million. It did not originate any loans during the period and said was not intending to do so for the near future.
The terms of the interest payments, to be made in the fourth quarter of 2008, allow Corus to defer payments for up to 20 consecutive quarters without it being a default, the company said in a statement.
During the period that the interest deferrals have been elected, Corus will continue to record the expense associated with the debentures, the company said.
The company will be precluded from paying dividends or repurchasing stock during the deferral period, it said. Corus had suspended dividend payment in April.
Shares of the company were trading at $1.93 after the bell. The shares have lost over 80 percent of their value since January. (Reporting by Sweta Singh in Bangalore; Editing by Jarshad Kakkrakandy, Dinesh Nair)
