Although FBR Capital thinks reports that Capital Source (NYSE:CSE) has retained an adviser to prepare them to be acquired could be in order to test the waters, they add if the reports are confirmed, Capital would be able to approach it from a position of strength.
FBR says, "While we believe a sale of CSE is unlikely in the immediate future, given our view that the company is in the relative early stages of executing its long-term business plan to become a commercial bank with substantial upside remaining to the share price, banks are desperate for asset origination platforms in which CSE has a proven ability. While the several news reports, including those from Bloomberg and Reuters, claiming that CSE has engaged an adviser to explore options may be correct, we believe it could be to "test the waters" and gauge potential interest. Given CSE's strong capital levels, liquidity position and improving profitability, if the reports are accurate, we believe the company would be approaching this process from a position of strength. Should we be incorrect in our view and the company decide to sell, we believe the shares could be worth $8.50-$10.50 in a transaction. That said, we believe given the organic upside potential remaining in the business, we expect management would be unlikely to accept an offer in the lower end of the range."
FBR Capital maintains an "Outperform" rating on Capital Source, which closed Thursday at $7.65, up $0.32, or 4.37 percent.
Showing posts with label Capital Source. Show all posts
Showing posts with label Capital Source. Show all posts
Friday, January 7, 2011
Friday, December 10, 2010
Capital Source (NYSE:CSE) Improves Financial Flexibility
Noteholders of a 12.75 percent Senior Secured note due in 2014 approved an amendment improving the financial flexibility of Capital Source (NYSE:CSE).
FBR Capital commented, "We reiterate our Outperform rating on shares of CapitalSource following the announcement that the noteholders of the 12.75% Sr. Secured Note due in 2014 have approved an amendment that substantially improves CSE's financial flexibility. In addition to permitting the use of cash to meet convertible debt redemption obligations, which we expected, CSE was able to obtain the ability to repurchase shares, downstream capital to the bank and leverage assets at the holding company. Concurrent with the amendment announcement, CSE announced a $150M share repurchase program (- 7% of shares at current price) over a period of up to two years. We view the amendment as providing substantially more flexibility than we had expected and therefore a significant positive for the shares. The increased financial flexibility also alleviates investor uncertainty with regard to how CSE was going to resolve its over-capitalized position (projected 23% TCE ratio by FYE11), thereby providing a clearer path to improved ROE's."
FBR maintains their "Outperform" rating on Capital Source, which was trading at $6.90, up $0.11, or 1.62 percent, as of 12:18 PM EST.
FBR Capital commented, "We reiterate our Outperform rating on shares of CapitalSource following the announcement that the noteholders of the 12.75% Sr. Secured Note due in 2014 have approved an amendment that substantially improves CSE's financial flexibility. In addition to permitting the use of cash to meet convertible debt redemption obligations, which we expected, CSE was able to obtain the ability to repurchase shares, downstream capital to the bank and leverage assets at the holding company. Concurrent with the amendment announcement, CSE announced a $150M share repurchase program (- 7% of shares at current price) over a period of up to two years. We view the amendment as providing substantially more flexibility than we had expected and therefore a significant positive for the shares. The increased financial flexibility also alleviates investor uncertainty with regard to how CSE was going to resolve its over-capitalized position (projected 23% TCE ratio by FYE11), thereby providing a clearer path to improved ROE's."
FBR maintains their "Outperform" rating on Capital Source, which was trading at $6.90, up $0.11, or 1.62 percent, as of 12:18 PM EST.
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