[capeman]

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.

[capeman]

Might as well get your loan through Countrywide and don’t forget to buy their stock at current $20 a share. It’s an investment right and you wouldn’t want to have to take the time to wait until it is $10 or less shortly. (cynical smile)

In reality you do what you have to do but you might as well hedge by shorting the HBs and Banks to get your money back when this is all over. Also, don’t forget the fact that with 100% LTV if the price on the condo declines enough to make the bank twitch they can call the mortgage in and you will have to pay all of it. That won’t make the wife too happy. For when the financial times may get rough in your new place you can listen to this little ditty to keep your spirits up…

Suzanne Researched This: Part 2

BTW-I just lost my little brother to a condo purchase in Murrieta of all places. Can’t save them all but at least I tried.

[capeman]

I wouldn’t be surprised to see the Fed go for the other knee real soon. It won’t help the market at all in the long term but will keep the shorts on their heels and less willing to go all in.

[capeman]

With respect to dividends and distributions upon the liquidation, winding-up or dissolution of the Company, the Convertible Preferred Securities rank in priority senior to the Company's common stock and to each other class of capital stock or series of preferred stock (where the terms of the stock do not expressly provide that it ranks senior to or on parity with the preferred stock) and on parity with any additional Convertible Preferred Securities and any other class of capital stock or series of preferred stock. Convertible Preferred Securities each have a Conversion Price of $18.00, which may be adjusted upon the occurrence of certain events.

This is directly from the 8-K and I'm wondering what could be construed as a CERTAIN EVENT. Perhaps the stock going below $18 a share and nowhere in the filing does it state that BAC can't short the company to nil in addition to making this investment. I can tell you from experience working in companies with heavily issued preffered stock that it gets the preferred their money back at the expense of the common shareholder even in liquidation. I'm sure BAC knew there would be a pop on the stock due to people thinking the pressure was off of the company. Good time to get some of your money back shorting with 140million share trading volume at levels up to 50% or greater price than the preferred issuance. This is referred to as the common practice of "Death Spiral Financing".

http://en.wikipedia.org/wiki/Death_spiral_financing

Although the best of faith in companies and people would lead one to believe that this is not practiced, this is business and banking and they are only in the business to make money at all possible costs. I don't think they are going to cover their shorts and take the profit. They will take the Loan Servicing group during the firesale.

I’m not saying you’re wrong as I can’t be 100% sure obviously but I have put money on this theory so if I am wrong I will pay dearly for it. Only time and money will tell.

[capeman]

With respect to dividends and distributions upon the liquidation, winding-up or dissolution of the Company, the Convertible Preferred Securities rank in priority senior to the Company's common stock and to each other class of capital stock or series of preferred stock (where the terms of the stock do not expressly provide that it ranks senior to or on parity with the preferred stock) and on parity with any additional Convertible Preferred Securities and any other class of capital stock or series of preferred stock. Convertible Preferred Securities each have a Conversion Price of $18.00, which may be adjusted upon the occurrence of certain events.

This is directly from the 8-K and I'm wondering what could be construed as a CERTAIN EVENT. Perhaps the stock going below $18 a share and nowhere in the filing does it state that BAC can't short the company to nil in addition to making this investment. I can tell you from experience working in companies with heavily issued preffered stock that it gets the preferred their money back at the expense of the common shareholder even in liquidation. I'm sure BAC knew there would be a pop on the stock due to people thinking the pressure was off of the company. Good time to get some of your money back shorting with 140million share trading volume at levels up to 50% or greater price than the preferred issuance. This is referred to as the common practice of "Death Spiral Financing".

http://en.wikipedia.org/wiki/Death_spiral_financing

Although the best of faith in companies and people would lead one to believe that this is not practiced, this is business and banking and they are only in the business to make money at all possible costs. I don't think they are going to cover their shorts and take the profit. They will take the Loan Servicing group during the firesale.

I’m not saying you’re wrong as I can’t be 100% sure obviously but I have put money on this theory so if I am wrong I will pay dearly for it. Only time and money will tell.

[capeman]

With respect to dividends and distributions upon the liquidation, winding-up or dissolution of the Company, the Convertible Preferred Securities rank in priority senior to the Company's common stock and to each other class of capital stock or series of preferred stock (where the terms of the stock do not expressly provide that it ranks senior to or on parity with the preferred stock) and on parity with any additional Convertible Preferred Securities and any other class of capital stock or series of preferred stock. Convertible Preferred Securities each have a Conversion Price of $18.00, which may be adjusted upon the occurrence of certain events.

This is directly from the 8-K and I'm wondering what could be construed as a CERTAIN EVENT. Perhaps the stock going below $18 a share and nowhere in the filing does it state that BAC can't short the company to nil in addition to making this investment. I can tell you from experience working in companies with heavily issued preffered stock that it gets the preferred their money back at the expense of the common shareholder even in liquidation. I'm sure BAC knew there would be a pop on the stock due to people thinking the pressure was off of the company. Good time to get some of your money back shorting with 140million share trading volume at levels up to 50% or greater price than the preferred issuance. This is referred to as the common practice of "Death Spiral Financing".

http://en.wikipedia.org/wiki/Death_spiral_financing

Although the best of faith in companies and people would lead one to believe that this is not practiced, this is business and banking and they are only in the business to make money at all possible costs. I don't think they are going to cover their shorts and take the profit. They will take the Loan Servicing group during the firesale.

I’m not saying you’re wrong as I can’t be 100% sure obviously but I have put money on this theory so if I am wrong I will pay dearly for it. Only time and money will tell.

[capeman]

Good luck to them on passing CDS paper. People aren’t touching corporate paper with a long pole at this point. They received a Preferred stock point of conversion at $18. The price can be altered by BofA to get more shares if liquidation occurs. So say they get 111 million shares or ~14% of the company at $18 but if the stock goes to $9 they get double the shares in conversion. If the stock goes to near Zero they screw the common stock holders and take what they’ve wanted all along which is the servicing unit. You can’t tell me that getting in at $18 when the stock was $21 then seeing it pop to $26 on volume of over 140million shares the next day that they weren’t shorting CFC into the hole on that. To top it they get a higher rate dividend than the borrowing rate so they are pretty much light of risk and the first vulture to the body in a liquidation event.

[capeman]

Good luck to them on passing CDS paper. People aren’t touching corporate paper with a long pole at this point. They received a Preferred stock point of conversion at $18. The price can be altered by BofA to get more shares if liquidation occurs. So say they get 111 million shares or ~14% of the company at $18 but if the stock goes to $9 they get double the shares in conversion. If the stock goes to near Zero they screw the common stock holders and take what they’ve wanted all along which is the servicing unit. You can’t tell me that getting in at $18 when the stock was $21 then seeing it pop to $26 on volume of over 140million shares the next day that they weren’t shorting CFC into the hole on that. To top it they get a higher rate dividend than the borrowing rate so they are pretty much light of risk and the first vulture to the body in a liquidation event.

[capeman]

Good luck to them on passing CDS paper. People aren’t touching corporate paper with a long pole at this point. They received a Preferred stock point of conversion at $18. The price can be altered by BofA to get more shares if liquidation occurs. So say they get 111 million shares or ~14% of the company at $18 but if the stock goes to $9 they get double the shares in conversion. If the stock goes to near Zero they screw the common stock holders and take what they’ve wanted all along which is the servicing unit. You can’t tell me that getting in at $18 when the stock was $21 then seeing it pop to $26 on volume of over 140million shares the next day that they weren’t shorting CFC into the hole on that. To top it they get a higher rate dividend than the borrowing rate so they are pretty much light of risk and the first vulture to the body in a liquidation event.

[capeman]

Right. I’d like to see Mayor Sanders try that in San Diego with all of the budget crunch and debt the City has been dealing with. He’d be hung by his own innards.

I never pegged the Los Angelites for being smart cats anyways. That’s the kind of crap that goes on in places like Ohio.

[capeman]

Right. I’d like to see Mayor Sanders try that in San Diego with all of the budget crunch and debt the City has been dealing with. He’d be hung by his own innards.

I never pegged the Los Angelites for being smart cats anyways. That’s the kind of crap that goes on in places like Ohio.

[capeman]

Right. I’d like to see Mayor Sanders try that in San Diego with all of the budget crunch and debt the City has been dealing with. He’d be hung by his own innards.

I never pegged the Los Angelites for being smart cats anyways. That’s the kind of crap that goes on in places like Ohio.

[capeman]

But it has put a higher floor on CFC's potential price decline, even if it's only a couple of bucks.

There is no higher floor due to that deal. It just gave BAC a security net and shorting opportunity on their investment. Remember they get preferred shares so they get the goods first in a liquidation pulling the floor out from under the common shareholder. They just screwed the longs and for that put a lower price floor on a BK.

[capeman]

But it has put a higher floor on CFC's potential price decline, even if it's only a couple of bucks.

There is no higher floor due to that deal. It just gave BAC a security net and shorting opportunity on their investment. Remember they get preferred shares so they get the goods first in a liquidation pulling the floor out from under the common shareholder. They just screwed the longs and for that put a lower price floor on a BK.

[capeman]

But it has put a higher floor on CFC's potential price decline, even if it's only a couple of bucks.

There is no higher floor due to that deal. It just gave BAC a security net and shorting opportunity on their investment. Remember they get preferred shares so they get the goods first in a liquidation pulling the floor out from under the common shareholder. They just screwed the longs and for that put a lower price floor on a BK.

[Author]

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