Signature Group Holdings LLP, a Sherman Oaks-based distressed buyout firm that’s seeking to revive Fremont General Corp., is scaling down the onetime subprime lender’s operations here and plans to sell or lease its former headquarters in Anaheim Hills.
Fremont, which emerged from bankruptcy reorganization in June and now operates as Signature Group Holdings Inc., has been in Anaheim Hills for 20 years.
During Fremont’s bankruptcy proceedings, the Anaheim Hills site became the headquarters for the company, which previously was based in Santa Monica and then Brea.
The Anaheim Hills building had served as a hub for Fremont’s subprime mortgage loan business, which, during the boom of the 2000s, became the fifth-largest subprime lender in the nation, with more than 3,500 employees.
The office housed several hundred workers before the mortgage meltdown.
Now, only 40 workers occupy the 39,000-square-foot building.
That soon will be down to zero as executives at Signature Group take over operations and shift the focus of the business.
“We’re aggressively moving that headcount down,” said Craig Noell, Signature Group’s chief executive. “They are very dedicated, hard-working people. They are working themselves out of a job, and yet they embraced that.”
Noell is part of a new management team that also includes: John Nickoll, cofounder and former chairman of Los Angeles-based Foothill Capital Corp., now part of Wells Fargo & Co.; Robert Peiser, a former chief executive at Texas’ Omniflight Helicopters Inc. and Imperial Sugar Co.; corporate lawyer and New York-based investor Kenneth Grossman; and Kyle Ross, a Signature managing director and chief operating officer.
All of the executives have made investments of more than $500,000 as part of the reorganization, according to Noell. They are looking to lead the company out of the mortgage business and into loans to midsize companies.
They’re hoping to fill a void, according to Noell.
“Middle market lending remains one of the biggest causalities of the economic downturn,” he said.
Signature also could look to acquire and hold companies with investments of $3 million to $20 million, according to Noell.
“If we can acquire a great business and have a great management team with good dynamics, we don’t have to look to sell in three to five years,” he said. “We can hold it for 15 years and make that business successful.”
Signature won the right to reorganize the former Fremont in a long bankruptcy. Signature was one of three groups vying for control of the business.
James McIntyre, Fremont’s founder and chief executive from its initial public offering in 1970 until his retirement in 2004, backed Signature’s plan. He put $1 million of his own money into the reorganization.
“I’m very pleased with what I’ve seen so far,” said McIntyre, who is the largest shareholder, with about 12% of the company.
Shareholders of the former Fremont own about two-thirds of the company after the reorganization, with Signature owning a minority stake. The structure allows the company to take advantage of Fremont’s $769 million net operating losses that can be used to offset future taxes.
The company’s shares trade on the low-profile Pink Sheets exchange under the stock ticker “SGGH.”
Signature retained about $125 million worth of Fremont mortgages that now are valued closer to $40 million, Noell said.
Fremont History
Fremont filed for bankruptcy in 2008. The company once ran a bank and made home loans to borrowers with imperfect credit.
It packaged loans and sold them as bonds to Wall Street. When the loans started going bad in 2007 and 2008, Fremont was forced to buy them back, crushing the company.
“It was a very profitable business for several years,” McIntyre said. “Then all of sudden it went into the tank.”
Under threat from regulators, Fremont sold its banking unit to Maryland’s CapitalSource Inc. in 2008.
What used to be Fremont now is something of a rarity as it is one of the few subprime lenders to be granted a new lease on life. Many of its competitors imploded or were gobbled up by big financial services companies.
“We were probably one of the first to get out of it and, as a result, we’re still alive,” McIntyre said. “Many others were in too far and stayed in too long. And (they) didn’t recover.”
