This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

First Union Plunges on Rumor Sunbeam Loan Went Bad

Shares of First Union (FTU) got crushed Tuesday afternoon on fears that a bad loan will soak the bank's bottom line.

Down the Mountain
First Union's rumor-fed slide

The talk among traders and some hedge fund managers was that First Union is set to take a big charge for a loan to troubled consumer product maker Sunbeam (SOC). Also hurting First Union shares was the bankruptcy filing of a First Union loan customer, bed-and-bath furnishings maker Pillowtex (PTX). First Union was mostly flat before dropping at midafternoon on heavy volume. The stock ended up dropping $2.63, or 8.7%, to $27.44.

On Monday, First Union's quarterly report with the Securities and Exchange Commission included the following comment in a discussion of credit quality:

    In addition, in late October of this year, the financial condition of a single large borrower deteriorated significantly. As of the date of this filing, it is not possible to estimate the loss content of this credit. We will continue our review of the credit, and it is possible that it may be classified as nonperforming in the fourth quarter of 2000.

First Union declined to comment on the identity of the borrower, citing policy. Speculation abounds that the loan is to Sunbeam, for which First Union is known to be a major debt underwriter. Along with Bank of America (BAC) and Morgan Stanley Dean Witter (MWD), First Union lent a total of $1.7 billion to Sunbeam in March 1998. Sunbeam's public-relations firm said no one at the company was available to comment.

Sunbeam shares traded at 81 cents Tuesday, slightly off their 1998 high just above $50. Bank of America slipped $1.56, or 3.3%, to $45.88.

Sunbeam plunges after Dunlap debacle

First Union, Bank of America and Morgan Stanley made the $1.7 billion loan to Sunbeam in March 1998, just a couple months before the company unexpectedly announced poor operating results. Sunbeam, under the leadership of Al Dunlap, who later left, was then accused of accounting irregularities, and has since posted steep losses. As in all so-called syndicated loans, the three financial institutions had planned to reduce their exposure to the Sunbeam credit by distributing chunks of it to other lenders. However, Sunbeam's subsequent troubles made it extremely difficult to pass off this loan, and all three banks are thought to still have significant exposure to the loan on their books.

Sunbeam lost $140 million in the fist six months of this year, vs. $108 million in the year-ago period. The Boca Raton, Fla.-based company had $2.4 billion of debt on its balance sheet at the end of June, the most recent figures available.

Bank of America declined to comment, citing a policy of not commenting on client relationships. Morgan Stanley also wouldn't comment, saying it doesn't comment on its holdings.

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 17,804.80 +26.65 0.15%
S&P 500 2,070.65 +9.42 0.46%
NASDAQ 4,765.38 +16.9840 0.36%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs