By Matthew Goldstein
SmartMoney.com - Stock Watch
AS IF A SLUMPING ECONOMY wasn't bad enough, bankers are getting awfully jittery these days about little-known Finova
Group (NYSE:FNV), an Arizona-based financial-services company that specializes in lending to midsize companies.
Why the anxiety? Moody's Investors Service, the credit-rating agency, expects Finova to file for bankruptcy any
day now in order to restructure or eliminate the estimated $11 billion in debt it owes to banks, bondholders and
other creditors. If that were to occur, it would be one of the biggest debt restructurings ever. And the fallout
could spell trouble for the banking industry, since nearly $4.7 billion of the debt is in the form of bank loans.
That isn't nearly enough to cause problems for the banking system all by itself, but it underscores the nasty problems
lenders are faced with these days.
It's difficult to determine which banks are on the hook. Multimillion-dollar commercial loans like the ones made
to Finova are often ``syndicated,'' meaning several banks buy a portion of the loan in order to spread the risk
of a default. But experts say the banks that originated these massive loans are the ones most likely to carry the
highest percentage of Finova's bank debt in their portfolios. Assuming that's true, the list of suspects is a Who's
Who of the nation's biggest banks: Wells Fargo (NYSE:WFC), Bank of America (NYSE:BAC), Bank One (NYSE:ONE), First
Union (NYSE:FTU), Citigroup's (NYSE:C) Citibank, J.P. Morgan Chase (NYSE:JPM) and FleetBoston Financial's (NYSE:FBF)
Fleet Bank, according to industry analysts and Loan Pricing Corp., a research firm.