To address many points here since I’m heavily invested in CFC on the short side:
1) Convertible deal with BofA- That was $2B of preferred stock at pretty much any given price at or below $18. If the stock drops to $6 that is then a “certain event” that will give BofA 3X the preferred shares at liquidation plus the ~7% interest on the convertible. BofA is has shown great interest in Countryslide’s servicing unit and with preferred shares should be able to pick that clean from the carcass. Meanwhile the theory is that BofA was also headging by shorting CFC at the post news pop to $26 a share down. Thereby likely getting back 25% of the money in the process.
2) Access to the Fed disount window- CFC does not have direct access to the window due to lack of acceptable collateral… meaning their paper is not worth a loan.
3) CD at 5.75% industry leading- that means they are seriously looking for money to keep solvent. They are paying out for it with the high rate. Meanwhile if insolvency rears up and kicks CFC back the CD customers may have to get their money back from the FDIC instead.
4) How the operations are going- well they drew down their entire credit line, took a desperation convertible placement with BofA and they are now trying to draw from assets in CFC Bank… meanwhile they cannot place their MBS paper and likely are getting “called” on quite a bit of paper once sold and coming back with the REOs… I would say operations are not too smooth at the moment which is why I chose to short them.
