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  • amfads amfads Feb 24, 2011 2:43 PM Flag

    Mumbo-Jumbo! Cash equity is what counts!

    All this mumbo jumbo about converting this or that preferred to common doesn't bring in any more equity cash. And *that* is what is needed (and demanded by FDIC) to prevent taking over the banks under CBC. Recently FBC raised some $400 million in *new* capital (at considerable dilution, I might add) but it soaked up whatever local (Michigan) bank capital might be available. That was *real* (and new) equity investment.

    I predict that the FDIC will close down most of CBC's banks and (probably) sell them off to be run by FBC. How CBC common will fare under such a deal - well, you figure it out. I'm outta here.

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    • Look at it in another way. Their loan loss reserves are at 5.6%, which is unusually high in the banking industry. I follow BAC and C and their loss reserves are slightly lower then 4.5%.
      CBC could have easily added much less to the loan reserve in the 4th Q and not taken the goodwill to zero. In other words, they could have easily made the 4th Q look a lot better then it did. But they decided to clean out their books (add extra into the loan reserves and write off the rest of the goodwill) and positioned themselves for a positive 1st Q, possibly a profitable one. I have no issue with their strategy.

    • Hmmm. Looks even bleaker now but who knows? Certainly not anyone on this board.

    • Well they have finally given out their last quarter's financials...

      So we can haggle over those figures for the next few weeks.

      I dont see much hope of getting those preferred holders to convert but, I admit, there is SOME small chance but I dont think it worth risking much money at this stage. 100% loss is 100% loss regardless of how low the price.

    • Reducing debt by $170-$200 million plus the accrued interest on that debt is not paper shuffling. Pref shares are under the liability section of the balance sheets and considered debt. Converting all the private pref share in addition to the public, that were recently converted will bring their tier I capital ratio to 8% range, which is considered adequately capitalized under FDIC regulations. The only problem I see is if the economy falls back into a reccession from these crazy runs in oil prices.

    • Show me some fresh investment cash, not just shuffling of paper. Authorizing of 1.5 BILLION common shares is ludicrous unless its going to bring in more capital. To whatever extent the exchange of preferred for common takes place (and it seems very small right now), it will NOT be enuf to hold off the FDIC action.

      Just my opinion, of course.

    • The private pref are held by different individuals. I doubt they and their lawyers were present for the second Special Meeting. So the company has to get in touch with them and their lawyers and get all of them to sign the paperwork. It's not a done deal until they sign the consent forms to convert. That is why it is taking more then a day.

    • Things are slowly looking better. Also in our favor is that the management got smoked from this development and they are very motivated to pull this company through. Management team is holding millions of shares (IRA and retirement accounts), millions of options (which are deep underwater right now), and have their jobs on the line pending the results of this business plan to recapitalize and turn this company around. If FDIC takes them over, the top management team are on the street and their severance packages are history as well. Not a good prospect in this tough economy.
      I think they will pull through, but I can't predict the future. Hopefully they get in touch over the weekend with all the private pref shareholders and get the conversion done.

    • FWIW,

      I agree with their basic analysis. This is a very positive development for a very troubed entity. But, there's more news that needs to play out.

      It's always easier to figure out which way a stock should go, than which way it WILL go...

    • Characterizing these shares as anything other than high risk is a fool's errand. If you care to speculate on their survival, that's fine. (I do as well...)

      I understand your motives and consider them benign. I don't understand the other poster's motivation. Either he/she is an overallocated, nervous long, or he/she is a short. If the former, simple reallocation of risk may make him/her feel more comfortable. If a short, I'm wasting my breath and I'm about to get spammed. But, I have plenty of wind in the first case, and an ignore button for the latter case.

    • The $19M conversion of the public pref. gave them a little breathing room and took them out of immidiate danger right now. According to the estimates they posted, their tier 1 capital ratio was raised to 3% just from that small conversion. Also FDIC will not take over a bank that has a recapitalization plan in effect and the company is executing on that plan. FDIC takes over banks as a last resort. Most the banks they took over were private and the public ones were just too far gone into the red.

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