If there is anything bad about the improved financial situation it is that there is now less leverage to get the TRUP holders to convert. They might just wait for outside capital which will dilute the common but bring the TRUP holders back to par plus back interest.
Outside capital investors will not step up until the situation improves further.
The CBCRO and CBCRP trust pref issues are up about 20% - 40% since the earnings report. I bought all 3 issues with a weighting towards the trust pref issues. Maybe you should have hedged your bets as well.
Yes, exactly. The whole regional bank sector is showing improvement. My number one rule of trading is "birds of a feather flock together". When all the regional banks start to recover it's actually time to buy the lowest quality issue of the bunch which is Capital Bank. Lower quality issues tend to rally last but can rally alot since expectations are so low. I primarily trade the debt issues. Notice how SCMFO, OSBCP and BBXT rallied over the last couple of months before CBCRO and CBCRP - which didn't rally until the last few days.
I think that CBCR stock is lagging the debt because the company needs to eliminate uncertainty about plans to raise capital. The best scenario for the stock (which would really screw the shorts) is that they find a buyer for Michigan Commerce (as they have done for so many other banks) instead of doing another pref conversion offer.
There is another way CBC can entice the Pref shareholders to convert. Trends in their financial results are showing that they will work through most of their bad loans by the end of this year, also the trend is showing that most of their banks/affiliates will be profitable by the end of the year, if not sooner (Michigan Commerce and AZ Sunrise could turn green in the current Q). If the Pref Convert right now and the trend holds, CBC can resume paying a divi to common as early as 2012. Conversion now would take CBC and all their banks into well capitalized category right now and the share price to $2+, which will double the face value of the pref shares. CBC's share price can sky very fast.
I'm watching CNBC right now and ticker symbol VRML is on the ticker every two minutes. VRML was trading at .01-.05 in Sept of 2009 and shot up to $20 in Oct of 2009, in a month. Just shows how fast the value of a stock can become under the right circumstances.
CBCRO and CBCRP are still trading at about 10X the price of the common stock, but IMO a 10X standalone exchange offer probably won't fly. I think an exchange offer would work if it was sweetened and made in conjunction with an outside capital raise.
Perhaps they could do something really creative like sell or spinoff Michigan Commerce in conjunction with a capital raise and exchange offer. That would be the kind of "shock and awe" transaction that would make all the debt holders willing to take equity IMO.