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CSE Message Board

  • kmbowles10 kmbowles10 Jun 24, 2008 10:04 AM Flag

    CSE Bank will have $2 B for new loans

    The reserve ratio is 15% for new CSE Bank = $850m

    CSE will sell $2.2b to CSE Bank.

    $500 million liability from cloans purchased in FIL deal.

    $5.6 b new deposits minus 850 m minus 2.2b minus 500m = $2 billion available for new loans.

    Opinions? Corrections?

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    • Agree regarding cash flow, but I think Trubulator has it right as long as they retain more than 50%.

    • reatained shares will improve balance sheet if IPO price is strong

      cash will come in for the shares sold, reducing the high cost revolvers

      no additional cash flow b/c they already get that cash flow now

    • Makes sense.

      But, at least for us investors, we can assign a value to it when we do our analysis.

    • If CSE IPO's the Healthcare REIT and retains a large position, how would the valuation of the retained portion be handled? The transaction will provide a market valuation for the retained shares which might be a book up creating a healthier balance sheet not to mention cash flow from the REIT.

    • I think their going to IPO the health care segment ASAP so any estimates are going to be thrown off.

    • If you think the banking regulators let CSE own a bank that they would take that much for their own account you clearly do not understand banking regulation.

      There is no way CSE can take that much credit from Fremont Bank.

      Geez that's how we got into a great depression... letting related parties empty their banks.

    • I agree with your math, only issue is there will be a renegotiation of the lines of credit at higher rates, (per 8K).

      • 1 Reply to chris1j
      • Not so I think.

        The renegatiation is for existing loans of CSE that are on the revolvers with their lenders. Yes - those lenders have been renegotiating their rates higher and are likely to continue to do so as these short term revolver lines terms expire.

        But CSE's loan volume on these revolvers will shrink by 2.2b after they sell the 2.2b to the new CSE Bank.

        New CSE Bank has a reserve ratio of 15% according to the filings. So after the new CSE Bank purchases loans from subsidiary CSE, and after also subtracting the reserve ratio of 850m, and subtracting about 500m in liabilities from FIL purchased commercial loans, the new CSE Bank will have about $2B in capital to make fresh loans.

        These new loans by new CSE Bank will have much lower cost of funds, about 3.5% paid to the depositors, versus the rising cost of funds from CSE's higher priced revolving lines of credit, about libor plus 4 = about 7.5%. New CSE Bank by my calculations will have $2b to make new loans at much better spreads than CSE. CSE will likley let much of the revolver lines bleed off as repayments occur.