Historically when there is an aquisition, the market price of the AQUIRER falls > Not always, but in approx 75% of
aquisitons make. Since this TONE/CSE business has gone on so long, it may be that the market has already priced that drop into the current share price. If that is so (and us on this board dont know that) then CSE is a great buy now.
COVERAGE REITERATED: CapitalSource (CSE) reiterated by Ferris Baker Watts. Reiterated rating Buy.
1:15 p.m. 01/29/2008 Provided By Briefing.com
The story you requested has been released as a headline-only news flash by the news provider.
I don't agree. I have to wonder why CSE needs to own a bank to have access to lower cost of funds. SFI and other specialty finance reits do not feel the need to own a bank. And TONE was a very aggressive institution who went out of their region to generate higher returns.
CSE isn't covering its dividend right now and I think there is a lot more to this TONE transaction that speaks more about CSE's relative position in the market. In other words, CSE appears to be operating from more of a position of weakness.
I used to own CSE but I am afraid that this bank acquisition while appearing to be a way of lowering their cost of funds may be more of a signal that CSE cannot compete with the likes of an SFI on a cost of funds basis without owning their own bank.
Understand, this exercise for me was to try to understand why CSE which I had always thought highly of although not high enough to put it anywhere in the league of an SFI was selling at such a high yield.
dogdaynooner (one of Ferdiefor's many aliases):
He would be wrong to say CSE is best in business.
I tend to think SFI is best of breed.
I think getting a 10% handle from an SFI or ACAS or AINV which are clearly the very best of breed is great and remember one thing. [Yes, that is the end of his sentence]
" SFI and other specialty finance reits do not feel the need to own a bank. "
I bet TMA bet that they had purchased a bank. TMA had to sell off over half their portfolio, suspend dividend, and stop making new loans, due basically to margin calls.
TONE 2007 earnings are 38 cents, DOWN 50% from 2006, and they're estimating $1.39 for 2008? This smells like a rat. Sorry, I read the prospectus, they have real estate losses in Florida requiring more charges & capital set aside, these numbers do not add up.
floating rates post for CSE portfolio was a good point.
More and more I am beginning to think that the TONE buyout isn't going to happen. You mentioned one thing that this deal has been going on for a long itme. Most deals which happen do not take this long.
Additionally the spread in TONE/CSE prices is telling me that the market is saying it isn't going to happen. Usually a normal spread is 10 to 15%. But a spread of 25% or higher clearly the market is saying, IT AIN'T GONNA HAPPEN. And for CSE I am thinking that might be a good thing. There is possibility that TONE's holdings might contain some bad loans (sub-prime stuff) which until now CSE has not had.
Would like to see other comments on this, PLEASE.
It ISN'T HAPPENING.Listened to Starwood Capital CEO in Daevos this morning, he said pension funds are suffering losses right now in commercial property, DOWN 25%, that they don't even know about.He's looking for a commercial collapse and firesales by 2009, said no deal over $5 bil will get financed, and many deals were financed 100%, they are underwater,when the bonds are due this year, they go default, tenants going out of biz. Said they need 80%+ capital in any new projects, was 60%. TONE has Florida losses, land, mortgages, CSE will backout and aren't those DRIPs dillutive?
Chavez urging Latin America to withdraw US bank funds.
Robert Reich says 20% chance of DEPRESSION.(truthout.org)
said Fed is in panic mode.
May cut all stocks, go back to 100% cash quickly.
CSE probably lowers divy.
I am currently out of CSE, but follow it closely. The spreads on all unclosed, but announced deals are wide right now. I bought a tone of ADS last week at 51. The deal is at 81 and change. It is back to the 60-s and still at huge discount. There are numerous others like HUN at 24 with a deal at 28.25. This is just a fear factor. Remember, CSE is still in the process of starting their own bank so as long as this drags on, they get closer to being ready without having to buy TONE. I don't like the TONE deal because of price and risk in the portfolio. I would rather CSE convert to a BDC and dump the REIT structure altogether so they could get rid of the MBS they own. Other BDCs are now selling at below book so they make a better bet than CSE. I am concerned that if this trades at a similar discount we are looking at 10, not 20. Finally, if there is a drip, every share bought is not dilutive to us, but only to the buyer as it is still above book value. So any purchase at this price through the DRIP is accretive to book. So thanks to all drip buyers.
I don't think any of us have any real facts to speculate any better than someone else. My opinion is that it is going through, but that is just my relying on comments from CSE management. It is troubling that it is taking so long, so who knows.......