Making a Pedigreed Lion Out of Three Alley Cats

In the savings-and-loan business, no one rivals Charles A. Wellman of Los Angeles as a surgeon for sick companies. In the past three years, he has substantially cured five firms that were suffering from serious financial maladies. Last spring, Wellman succeeded the ousted Bart Lytton as president and chief executive officer of California's Lytton Financial Corp., a huge but ailing holding company with total assets of $682 million. Now Wellman is involved in conducting his most intricate operation yet, which, if successful, will transform three weak S&Ls into one thriving $1 billion enterprise.

Under a deal devised with the help of Kidder, Peabody & Co., a group of blue-chip investors has agreed to give Lytton Financial a $25.5 million transfusion. The holding company will sell $8,000,000 worth of common stock to pay off a crippling burden of debt. To rebuild its reserves, the company's largest subsidiary, Los Angeles-based Lytton

S&L, also will sell the group of investors $17.5 million in debentures that are convertible into the common stock of Lytton Financial.

When the securities actually change hands next month, Lytton S&L plans to merge with two smaller Southern California savings-and-loan associations, Equitable of Long Branch (assets: $318 million) and Mission of Santa Ana (assets: $39 million). The mammoth merger was approved by the Federal Home Loan Bank Board two weeks ago, but financial men are more fascinated by the audacity of the move than by its size. Says one competitor: "Wellman is converting three alley cats into a pedigreed lion."

Tempting Bait. Equitable, also headed by Wellman, and Mission need more capital, but neither is large enough to raise it easily. Thus they can use the aid of the Lytton holding company, which, thanks to its listing on the New York Stock Exchange, has readier access to Wall Street money. Even so, Wellman had to offer investors some tempting bait. They will pay substantially less than the current market price for the Lytton stock, which closed last week at $11.50 a share.

Charlie Wellman, 53, entered the S&L field after graduating from the University of Southern California law school in 1940. He learned the business at Coast Federal Savings, an aggressive competitor for consumers' savings, and made his mark by helping Glendale Federal S&L grow from a $23 million midget to a $450 million leader in its industry. He quit as president of Glendale Federal in 1962 over policy disputes with the association's founder-chairman, but within hours was hired as president of Los Angeles' First Charter Financial Corp., now the nation's largest publicly owned S&L holding company.

The Tycoon Problem. Soon given the added authority of chief executive, Wellman cut expenses and tightened operating procedures until First Charter Financial had developed one of the industry's most economical operations. But he ran into trouble with British-born Centimillionaire S. Mark Taper, the chairman, who had long run the company as a private fief. "My biggest problem has always been dealing with tycoons," Wellman says. "Perhaps it's because at heart I'm one myself." The two strong-willed men clashed over everything from loan policy to salaries for other executives, and Wellman resigned in 1966.

That was the year when tight money pinched S&Ls everywhere. Soon Chairman John Home of the Home Loan Bank Board phoned Wellman for help. Three Las Vegas associations, representing 80% of Nevada S&L assets, were foundering. "It was a real financial crisis," recalls Wellman. "A collapse might have created a tremendous problem of confidence in S&Ls, far beyond the borders of Nevada." Flying to Washington, he proceeded to devise plans to reorganize, restaff and refinance the S&Ls. In a matter of months, aided by large federal loans, the associations were convalescing.

Into the Black. The next call came from Equitable, which had long been plagued by eccentric management and overgenerous realty loans. Wellman fired many of Equitable's top executives, installed a solid management team that he recruited from among men who had worked with him before. Equitable was just at the point where it foresaw moving into the black by the end of this year when Wellman was drafted to take over at Lytton.

Wellman still draws $50,000 a year from an executive contract with Taper's First Charter. As president of both Equitable and Lytton, he is paid another $150,000. The Home Loan Bank Board usually bans such arrangements on grounds that they constitute a conflict of interest. In this case, the board prized Wellman's healing talents so highly that it approved his multiple role without hesitation.

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