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  • don_t_panick don_t_panick Jun 7, 2012 1:53 PM Flag

    Michigan Commerce Internal Merger

    CBCR just released an SEC filing indicating that MIchigan Commerce was merged with some other subsidiary banks. They say that the purpose of this would be to make it easier to raise capital for the merged subsidiary. An excerpt from the 8K filing is pasted below.

    Raising money at the holding co level (i.e. issuing CBCR stock) dilutes shareholders. If they can raise money at a subsidiary level, perhaps they can avoid that type of direct dilution of shareholders. Interesting move by CBCR in any case. Clearly this is just the first step of whatever they are up to. See last sentence of excerpt.

    On June 1, 2012, Capitol effected a reorganization of several of its affiliate banks through a contribution agreement (the “Contribution Agreement” ) effective as of June 1, 2012 by and among Capitol, Michigan Commerce Bancorp Limited, a Michigan corporation and wholly owned subsidiary of the Corporation ( “MCBL” ) and other subsidiaries of the Corporation (the “Subsidiaries” ). Pursuant to the Contribution Agreement, the Corporation and the Subsidiaries contributed (i) all of the equity interests in each of Bank of Las Vegas ( “BOLV” ), Sunrise Bank of Albuquerque ( “SBAQ” ) and Indiana Community Bank ( “ICB” ) and (ii) over 99% of the equity interests in Sunrise Bank of Arizona (together with BOLV, SBAQ, and ICB, the “Subsidiary Banks” ) to MCBL in exchange for additional shares of MCBL. Capitol will retain its other banking subsidiaries, and the Subsidiary Banks do not represent substantially all of its assets. Prior to the transactions effected by the Contribution Agreement (the “Contribution” ), the sole asset of MCBL was the common stock of Michigan Commerce Bank. The reason for the Contribution is to create a more attractive structure for MCBL for capital raising purposes.

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    • It's ok. My son is only 3 and the limit was 2k a year, which I was able to max out. THe contribution limit is falling in 2013, but I thought it was going to be $1k. It's a shame they couldn't extend the $2k limit. It's worth a little over $12K right now, so I have something to work with (46.6K shares of CBCR shares at slightly less then .10 average). If this company hits like I expect it to, then he will have at least the first 2 years of college covered.
      And worst case scenerio is four more years for Obama, which won't effect him by the time he goes to college.

    • New Coverdell contribution limit for 2013 is only $500 and Obama is attacking other aspects of the program. If you use Coverdell money you save for college for your children, then it makes you ineligible to also receive some govt grants such as the Hope Scholarships being funded by taxpayer money.

      Any program that relies on the individual to do the right thing gets punished by Obama. This attack on the Coverdell accounts is very similar to how individual Medical Savings accounts were largely phased out under Obamacare. We should be moving towards more incentives for folks to save for retirement, college costs and large medical expenses - not less.

      Sorry for the off-topic rant.

    • Coverdell accounts are great. I ran up more than 50k in trading profits on 12K I put in my daughter's account over 6 years. She's now at a top University and the Coverdell account really helps out.

      Unfortunatey, I think you need to recheck the Coverdell rules. This "self reliance" program is yet another victim of Obama's move towards favoring programs that encourage govt reliance. I believe that the contribution limit has or is being lowered. They are also putting other restrictions on Coverdell accounts. For example you can't or won't be able to use them for private high school tuition.

    • By the way, I have been quitely adding shares to my kids COVERDELL ESA account. Too bad the contribution limit is only $2K a year.

      5/28/2012 CBCR BOUGHT 6800 SHARES OF CBCR AT $0.15 ($12.10)

    • If they are doing this change in prep for a lpossible sale that structure might make sense to protect the buyer from the potential FDIC lien against the holding co. I think a capital raise is more likely though.

    • Interesting filing. Either they have interested parties in a capital raise or they have a buyer in the waiting. They clearly stated that the BOD has the option to waive the 5% rule. Mich Commerce gained HUGE value during the last Q report and will become more valuable with the expected profit in the current Q. It is a lot simpler to sell the company to a PNC or WFC if all their banks are consolidated into one. Mich Commerce is the jewel and the rest are the throw-ins.

    • This is great news. The current administration is doing everything in its power to raise taxes. Higher taxes means the tax preservation plan is even more valuable. This also explains why there is never any volume traded on these shares.....they can't risk anyone independently acquiring more than five percent of the overall shares.

    • That's a significant event IMO. They've pretty much pulled everything together into a single subsidiary; at least everything large and most certainly everything that is troubled.

      You wrote: "If they can raise money at a subsidiary level, perhaps they can avoid that type of direct dilution of shareholders."

      Are you anticipating the possiblity of CBC recapitalizing the merged assets (MCBL, the new wholly owned bub), by selling a portion of it, using proceeds to recapitalize it?

      What's interesting about the move is that they've now tied the fate of all three together. They must think that they have a chance of recapitalizing the bank, since it's no longer possible to let any of the three go independently. Through the merger they've reduced their options considerably. That kind of a decision is suggestive that the endgame is close IMO. Otherwise they wouldn't restrict their options like this.

      • 2 Replies to heymee2
      • My guess is that the merged subsidiary banks are operating break even or better. They might be planning to have the subsidiary do some type of pref stock or loan. This structure allows anything the sub raises to be structurally senior to holding co debt. This would be a good plan since new capital would be ahead of stuff like the potentially unresolved FDIC lien at the holding co.

        Good plan for shareholders as it avoids dilution.

      • Some of the thinking on this board makes my head hurt, I guess I am being overly simplistic. I tend to look at this move as a good thing, based on the current situation. Obviously it is a move predicated on the fact that it is a troubled bank, I can't refute that. That being said, internal mergers have benefits, namely they can take advantage of economies of scale.

        I still think this management is going to fight and scratch and claw this bank out of the shadows. I can only hope. :)