On Mar 19, 5:45=A0pm, PaPaPeng <PaPaP...@[EMAIL PROTECTED]
> wrote:
> Citic's Close Call with Bear Stearns
> The unit of a Chinese state-owned conglomerate has shelved a deal to
> buy Bear Stearns shares at $120 apiece
> by Sameera Anand
> March 19,
2008http://www.businessweek.com/globalbiz/content/mar2008/gb2008=
0319_8866...
>
> =A0 Citic Securities confirmed yesterday that it would not proceed with
> its investment in Bear Stearns, allowing it to scrap a deal to buy
> shares at $120 apiece in a bank which currently trades at $6. But a
> host of other investors who have bought into Citi, Merrill Lynch,
> Morgan Stanley and UBS are stuck with paper bought at significantly
> higher prices than current traded levels.
>
> Citic Securities, which is part of Chinese state-owned conglomerate
> Citic Group, started talking to US investment bank Bear Stearns in the
> third quarter of 2007 after two Bear Stearns hedge funds were reeling
> from subprime losses and the investment bank had posted a large drop
> in profits. On October 22 the two firms announced they had inked an
> agreement for a strategic partner****p.
>
> Citic was to buy $1 billion worth of 40-year preferred securities
> convertible into about 6% of Bear Stearns equity. The conversion price
> of Citic's investment into Bear Stearns was around $120, based on the
> last five days traded prices at the time. Bear Stearns had traded down
> from a January 2007 high of $171 leading some market commentators to
> observe that Citic had got itself a bargain. The arrangement was
> somewhat reciprocal as Bear Stearns would eventually invest $1 billion
> in Citic's equity, based on Citic's traded share price.
>
> Bear Stearns' share price lost ground all of last week as investors ?
> correctly ? feared the worst and closed at $30 on Friday. Then
> JPMorgan bailed out the beleaguered investment bank over the weekend
> at a price of $236 million, which translates to a valuation of around
> $2 per share. Bear Stearns' shares lost 84% on the news, fini****ng at
> $4.81 on Monday but gained some ground on Tuesday to trade up to $7
> before closing around $6.
>
> Citic said yesterday it will not be going ahead with the investment,
> which was still awaiting approvals. But while this ended up being just
> a close call for Citic, other investors who bailed out
> subprime-affected banks have not fared as well.
>
> Just a few weeks after the Citic-Bear Stearns tie-up, Citi said the
> Abu Dhabi Investment Authority would invest $7.5 billion to buy up to
> 4.9% of the bank. Citi issued equity units to ADIA that are
> convertible into common shares at a price between $31.83 and $37.24
> per share. Until conversion in tranches in 2010 and 2011, the
> securities carry a coupon of 11%, payable quarterly. Citi's shares
> closed at $30.70 the day the markets learned of the ADIA investment.
>
> Then UBS announced that the Government of Singa****e Investment
> Cor****ation (GIC) and an undisclosed strategic investor in the Middle
> East would jointly invest SFr13 billion ($13.2 billion) to take a
> 10.5% stake in the Swiss bank. The investors bought notes convertible
> in two years, bearing a coupon of 9%. The shares traded at SFr57.2 on
> December 7. The conversion price is an average of the December 7 price
> and the volume-weighted average price of the three trading days prior
> to the extraordinary general meeting at which the issuer would seek
> approval, subject to a floor of SFr51.48 and a ceiling of SFr62.92.
>
> UBS currently trades at SFr26.02.
>
> On December 19 China once again stepped up to the plate with China
> Investment Cor****ation agreeing to a $5 billion infusion to acquire a
> stake of up to 9.9% in Morgan Stanley. The US investment bank issued
> equity units, bearing a coupon of 9% per annum payable quarterly,
> convertible into Morgan Stanley shares in August 2010. The conversion
> price was based on traded prices the week of December 17, with a floor
> set at a premium of 20% to the reference price. The reference price
> was $48.07-$57.68 per share.
>
> Morgan Stanley traded yesterday around $41.
>
> Merrill Lynch's gift to shareholders came on Christmas Eve when it
> announced Temasek and Davis Selected Advisors would subscribe to $6.2
> billion of stock at a price of $48 per share. Merrill Lynch traded at
> $56 the morning of the announcement, so Temasek and Davis seemed to
> have got a good deal buying at a 14% discount to the traded price
> (though the investors bought straight equity so got no fixed coupon).
>
> January brought both Citi and Merrill Lynch back on the road for
> another round of capital infusion.
Don't know much about USB. But I think us financial center stock will
do well
from this point except Citigroup. I heard the quarterly re****t. I
think the management
was hiding something. Citigroup's share price dropped prmoptly from
28+ to 22+ within
4 days. It then trade between 18 and 29. It closed at 20+ today. It
probably will go up
some during the coming months.
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