The financial sector continued to scramble in an effort to shore up capital, with two public offerings raising more than $7 billion and two major mortgage lenders facing mounting pressure to complete a number of transactions. In other corporate activity, several acquisitions made their way through the merger pipeline.
But first, Capstead Mortgage Corp. reported first quarter earnings of $30.1 million — nearly doubling the level of income in the fourth quarter and soaring from $6.2 million a year earlier. The Dallas-based real estate investment trust cited increases in financing spreads and net interest margins for the improvement.
As the market for agency securities began to freeze up in early March, Capstead saw its stock price tumble from $18.62 to $10.65 in less than one month. Today, shares were trading at $12.73.
Fitch Ratings issued a statement Thursday indicating REITs continue to turn to the bank term loan and mortgage markets as attractive refinancing vehicles for debt obligations despite the slowdown in the unsecured bond and commercial mortgage-backed securities markets. The ratings agency said low leverage and high existing coupons contributed to many REITs’ ability to refinance loans in a more restrictive lending environment and added that many REIT managements have also secured fixed-rate, low-cost long-term debt.
National City Corp. said Friday it completed its $7 billion equity offering. More than 126 million shares of common stock and nearly 64,000 shares of contingent convertible perpetual non-cumulative preferred stock were issued.
First Horizon National Corp. also reported Friday the completion of its public offering of 60 million shares of its common stock. Proceeds of more than $660 million will be used for general corporate purposes.
Shares of Luminent Mortgage Capital Inc. were de-listed by the New York Stock Exchange because its shares traded for less than $1 each and its market capitalization fell below $25 million for at least 30 consecutive days, a press release Friday said. Luminent shares now trade over-the-counter under the symbol LUMC.
Residential Capital LLC announced it is looking to trade $12.8 billion in outstanding notes with rates ranging from 7.125 percent to 9.875 percent and maturity dates from 2008 to 2015 for new notes at rates of 8.5 percent due May 15, 2010 and 9.625 percent due May 15, 2015. The new notes will be guaranteed by subsidiaries of ResCap and will be secured by substantially all of ResCap’s existing and after acquired unencumbered assets remaining available to be pledged as collateral.
The Minneapolis-based GMAC-subsidiary, however, warned in a Securities and Exchange Commission filing today that significant cash expenditures recently has reduced its liquidity position, and it could default on its debt. A number of steps to improve liquidity were outlined.
“There is a significant risk that we will not be able to meet our debt service obligations, be unable to meet certain financial covenants in our credit facilities, and be in a negative liquidity position in June 2008,” ResCap said in the filing. “We will be required, in order to satisfy our liquidity needs and comply with anticipated covenants to be included in our new debt agreements requiring maintenance of minimum cash balances, to consummate in the near term certain asset sales or other capital generating actions over and above our normal mortgage finance activities to provide additional cash of approximately $600 million by June 30, 2008.”
First Bank of Snook in Texas entered an agreement with the Federal Reserve Board to make significant changes to its operations that will improve its soundness, an announcement Thursday said.
Bremerton, Wash.-based WSB Financial Group Inc. entered an agreement with the Federal Reserve Bank of San Francisco promising to avoid moves that will deplete capital unless it first obtains the regulator’s approval.
The Federal Deposit Insurance Corporation said it processed 28 orders in March, including eight cease-and-desist orders, seven removal and prohibition orders, and eight civil money penalties. In addition, the regulator reported one prompt corrective action, three terminations of cease-and-desist orders and one termination of an 8(b) proceeding and 8(c) order.
Bank of America Corp. noted in a filing that it is now possible that it won’t support some of Countrywide’s debt after its planned acquisition during the third quarter, including the approximately $17 billion of medium-term notes, $4 billion of convertible debt, $2.2 billion junior subordinated debt and $1 billion of subordinated debt currently outstanding.
BoA‘s disclosure prompted Standard & Poor’s Ratings Services to lower corporate ratings on Countrywide Financial Corp. and Countrywide Home Loans Inc. to BB+/B from BBB+/A-2 and to BBB/A-3 from A-/A-2 on Countrywide Bank FSB. Bonds rated below BBB- are consider junk.
Countrywide indicated in a Feb. 29 SEC filing that access to the medium-term debt and equity markets will remain an important source of financing and its continued access to those markets is dependent on maintaining investment-grade credit ratings.
“If we were to suffer a significant credit rating downgrade, it could have a substantial adverse impact on our operations,” the filing stated. “If we were to be downgraded by any of [the three] ratings agencies and lose our investment grade rating, such downgrade could potentially result in the acceleration of certain secured debt obligations and adversely affect our ability to conduct trading applicable to the management and hedging of our MSR assets, retained interests, inventory of loans, commitments to originate and purchase loans and our broker-dealer operations.”
LaSalle Bank today began operating in Illinois as Bank of America, a press release said.
The Office of the Comptroller of the Currency granted preliminary conditional approval for the Northern Trust Company to establish The Northern Trust Company of California, N.A., which will solely engage in fiduciary activities, a letter to the institution stated.
The CDC Real Estate Opportunity Fund I has been launched with $200 million in committed funds to invest in distressed commercial mortgages, a press release said. The fund is expected to be leveraged to $2 billion and begin acquiring assets in 2009 as originations from 2002 through 2007 begin defaulting.
SunTrust Banks Inc. announced the completion of its stock swap acquisition of GB&T Bancshares Inc. An integration of the unit is planned for late summer.
New York-based Fortress Financial Group Inc. said in a statement that it is in the final stages of acquiring Trinity Mercantile Finance Group as well as other originators and lenders based in California, Florida and New York.
H&R Block Inc. announced it completed the sale of Option One Mortgage Corp.’s servicing business to WL Ross & Co. LLC-affiliate American Home Mortgage Servicing Inc.
Manufactured housing loan servicer Green Tree Servicing LLC has agreed to acquire the servicing platform assets of Origen Financial Inc., an announcement Wednesday said. The deal includes the transfer of approximately $1.6 billion of manufactured housing loans and is subject to approval by a number of related parties.
“As previously announced on March 13, 2008, recent and current conditions in the credit markets have adversely impacted Origen’s ability to originate loans for its own portfolio,” Origen CEO Ronald A. Klein stated in the press release. “As a result, Origen has recorded significant losses from the write off of goodwill, suspended origination of new loans for its owned-loan portfolio, sold its recently originated un-securitized loans at a loss and used the proceeds of that sale and a new secured credit facility to pay off our previous credit facilities.”
Wilmington, Del.-based WSFS Financial Corp. announced Friday it acquired a majority stake in 1st Reverse Financial Services LLC on Wednesday. The unit will become an operating subsidiary of WSFS Bank.
Illinois-based 1st Reverse is a reverse mortgage wholesaler that reportedly provides its brokers with “high-touch training, underwriting and loan processing.”
“1st Reverse has been making loans for more than a year now and, to reach its significant potential, will need the investment and resources,” WSFS President and Chief Executive Officer Mark A. Turner said in the statement. “As with many new initiatives, we expect modest start-up losses in the first year, but believe the revenue and profit opportunities of providing this product are great.”
