National City drops pants for $7 billion in liquidity

National City took on $7 billion in additional capital at a 40% discount to market price, sending shares tumbling as the beleagured bank looks to shake off bad mortgage bets and make it through the crisis. National City was reportedly looking to sell itself and has now turned to opportunistic Corsair Capital.

It’s interesting to see these banks eviscerated by these capital infusions. Talk about hard money. When a borrower doesn’t have FICO scores above 500 but still needed financing there is hard money which is based on equity rather than credit. The fees are typically exorbitant and the interest rate will make you blush; but at least the financing was available. Many people called hard money lenders “loan sharks” and other pejoratives.

I got to tell you - those guys ain’t got nothing on these institutional investors buying up positions in these ailing banks at 60 cents on the dollar.

From the Bloomberg article on National City’s sell-out:

National City Corp. joined Wachovia Corp. and Washington Mutual Inc. to tap what KBW Inc. calls “an abundance” of capital, after losses tied to the slumping housing market made U.S. financial companies a bargain for investors.

National City, Ohio’s biggest bank and subprime lender, agreed to sell a $7 billion stake to a group led by Corsair Capital LLC yesterday, at a 40 percent discount to market price. The move, which would dilute existing shareholder value by more than half, sent the stock plummeting.

“There’s an appetite out there for risk, but at a price,” Jason Arnold, an analyst at RBC Capital Markets in San Francisco, said yesterday in a phone interview. “Companies themselves are really desperate to get capital.”

This post was found on BlownMortgage
Follow the link to get to the orginal message.