Bankruptcy

Big Banks Still Struggles for Cash

By J. Michael McBride

Despite the unorthodox moves by the Federal Reserves to open the federal lending window higher and make it available for more cash starved financial companies, not just banks, news comes today that Citicorp offered stock which raised 4.5 billion. "The sale [of stock today] represents about 3 percent of Citigroup's shares outstanding as of March 31. The world's biggest banks, grappling with more than $300 billion of losses on mortgages, bonds and loans, have sought new capital to stave off credit rating downgrades that might jeopardize client relationships and access to financing. Companies usually try to avoid forced stock sales because they dilute the earnings power of current shareholders.

"They need the additional capital," said Ben Wallace, an analyst at Grimes & Co. in Westborough, Massachusetts, which manages $800 million including Citigroup shares. "The dilution factor is a secondary concern these days." …

In total, the bank's capital raising has diluted current shareholders by about 20 percent, Wallace estimated."

Here is a link to the whole article: http://www.bloomberg.com/apps/news?pid=20601087&sid=aEdkikTTTWwA&refer=home

Michael

Full post as published by Texas Lawyer Blog on April 30, 2008 (boomark / email).