GlenFed campaigns strongly for shareholder proxies.

But it's wary not enough may arrive in time for meeting

GlenFed Inc. officials may be forced to adjourn this week's special meeting of shareholders early because there may not be enough votes in favor of a restructuring that could save Glendale Federal Bank from government seizure, Richard Fink, GlenFed's general counsel, said last week.

A GlenFed source told the Business Journal that a week before the meeting the company was several million shares short of the majority needed to approve the restructuring -- 50 percent plus one share.

GlenFed is seeking shareholder approval of a complex restructuring that will fold GlenFed Inc. into Glendale Federal Bank and pump $375 million to $425 million in capital into the undercapitalized thrift.

Under the plan, unnamed institutional investors will provide the lion's share of the new capital for a 44 percent to 86 percent ownership stake in the company.

Existing shareholders would see a "substantial dilution" of their equity interests, in the words of GlenFed Chairman Stephen J. Trafton.

The amount of new capital raised and the institutional investors' stake depend on the extent to which existing shareholders and bondholders subscribe to a rights offering, which is also part of the restructuring plan.

But even though the plan does not depend on current shareholders subscribing to a rights offering, shareholders must approve the plan because it involves a merger of the holding company into the bank.

A special meeting of shareholders to vote on the plan has been called for Aug. 3 and shareholders have had four weeks to vote their proxies. If shareholders don't turn in their proxies, it has the same effect as voting no. As of July 27, a majority of the shares had not been voted, the GlenFed source said.

Fink acknowledged last week that the majority of shareholders had not voted.

"We are concerned to the extent that we need a 50 percent-plus-one majority, yeah," he said. But Fink said there was still time for shareholders to vote in favor of the plan, noting "there is a tendency for the vote to come in in the last week."

Under the plan's terms, stockholders would get only four shares of new common stock for every 100 shares they currently hold in GlenFed Inc.

When the plan was announced in June, Trafton said in a statement, "While the collateral effect of the reorganization plan will be a substantial dilution of the equity interests of existing shareholders, without new equity capital, the viability of the institution would be at severe risk."

The Office of Thrift Supervision has ordered GlenFed to inject hundreds of millions of dollars in capital into Glendale Federal Bank. GlenFed officials insist that seizure could result if the plan is not approved by shareholders.

Fink said last week that if by Aug. 3, the day of the stockholders' meeting, there is not a majority voting their proxies in favor or against the plan, GlenFed officers will "simply adjourn the meeting and do some more soliciting" of shares.

When the next meeting would be called depends on how many shares short shareholders are in the voting, Fink said.

"If it's 49 percent and we need another 100,000 (shares), it may be 24 hours (until the next meeting)," Fink said. "If we're short a couple of million, it might be a week. It depends on what the numbers are."

Meanwhile, GlenFed officials have launched a lobbying campaign to get shareholders to vote in favor of the plan.

GlenFed has hired a shareholders' soliciting firm, New York-based McCormick & Pryor Ltd., to telephone shareholders and ask them to vote their stock.

In addition, GlenFed has invited shareholders to special meetings held in 12 locations all over California at which GlenFed officials have asked shareholders to vote their shares, GlenFed officials said.

Frieda Molnar, a Northern California resident who owns 10,000 shares of GlenFed stock, said she has been contacted by a soliciting firm six times in the last month pressing her to vote for the restructuring.

Molnar said she attended a special meeting in a Glendale Federal Bank branch in San Jose at which a GlenFed executive vice president and six other vice presidents "in three-piece suits" spent two hours trying to convince her and two other shareholders to vote for the restructuring.

Anne Hansen, deputy director of the Council of Institutional Investors in Washington, D.C., said she had never heard of proxy solicitations that were "that aggressive."

She said, "If they're putting this much pressure on the individual shareholders, (the vote) must be pretty tight. It sounds like they need every single vote and they're pulling out all the stops."

Shareholder Molnar said she does not plan to vote her shares at all, since the restructuring will dilute her GlenFed stock.

"I've already lost thousands of dollars," she said. Molnar said she bought stock when it was trading at more than $2 a share. On July 27, GlenFed stock hit its all-time low-81 cents a share.

Barksdale Hales, who holds 76,000 Conshares, said he was contacted three times by GlenFed's soliciting firm.

"They just call up and tell me what a wonderful deal this is," Hales said sarcastically. "Four shares of stock for 100 of ours! I feel they are trying to boondoggle the shareholders."