FDIC Orders Fremont to Recapitalize Sub

The Federal Deposit Insurance Corp. has sent Fremont General Corp., Brea, Calif., and its subsidiary Fremont General Credit Corp. a supervisory prompt corrective action directive ordering them to recapitalize Fremont Investment & Loan by May 26. The FDIC issued the directive with the concurrence of the California Department of Financial Institutions, which regulates FIL, a chartered industrial loan company. The directive gives FGC three options: the sale of enough shares or obligations of FIL to raise the money to capitalize it adequately; a merger with or acquisition by another insured depository; or the divestiture of FIL by FGC and FGCC. In its statement, FGC noted that it had hired Credit Suisse Securities (USA) LLC and Sandler O'Neill & Partners LP at the end of February to develop and implement strategic options. The FDIC directive says FGC, FGCC, and FIL had failed to comply with the capital maintenance provisions in a cease-and-desist order issued March 7, 2007. FGC did submit a revised capital restoration plan to the FDIC on Nov. 9, 2007, that FIL admitted was obsolete on March 17, 2008.