Who is receiving/expecting TARP funds

Discussion in 'Economics' started by bond tr4der, Dec 22, 2008.

  1. m22au

    m22au

    #11     Mar 7, 2009
  2. yeah Atlanta, one of the worthless cities (second to Detroit)

    makes sense to put money into something that is useless

    another reason Obama needs to go
     
    #12     Mar 7, 2009
  3. m22au

    m22au

    #13     Mar 16, 2009
  4. m22au

    m22au

    Updated to include more links about TARP data.

    Also an article from SeekingAlpha from May 2009. This article compares market caps to bailout money received.

    http://seekingalpha.com/article/135589-bailed-out-banks-how-they-stack-up

    Also articles about TARP dividends not paid can be found here:

    http://www.elitetrader.com/vb/showthread.php?s=&threadid=21451&perpage=6&pagenumber=9


    ******

    The experience from Friday 27 Feb (Citigroup Friday ???) is that it looks like (as of 26 Feb 2009) the share prices of US financials did not price in the conversion of preferred stock to common stock.

    I am reviewing preferred stock investments made by the US Govt under TARP to provide examples of financials where the preferred stock investment is large when compared to the market cap of the company.

    As an example, market cap of BAC at a share price of $3.95 at Friday's close is $19.82 billion. However the US Govt has already made a preferred stock investment in BAC of $45 billion ($25 billion in October 2008 under TARP and then anotehr $20 billion in the January 2009 bailout).

    Web sites used to collate this information are

    New link:
    http://bailout.propublica.org/main/list/index

    Old Link:
    http://www.propublica.org/special/show-me-the-tarp-money

    http://projects.nytimes.com/creditcrisis/recipients/table

    added link:
    http://www.snl.com/Sectors/Financial-Institutions/FIG/Home/Tarp.aspx

    http://bailout.uslaw.com/?page_id=353

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

    http://www.marketwatch.com/news/story/list-companies-planning-participate-tarp/story.aspx?guid={A56A737D-0B6F-4C72-B97B-4CAFC806E83E}

    Stress tests:
    http://en.wikipedia.org/wiki/Supervisory_Capital_Assessment_Program
     
    #14     Oct 31, 2009
  5. zdreg

    zdreg

    what is significance of large amount of outstanding preferred?
     
    #15     Oct 31, 2009
  6. m22au

    m22au

    Zdreg,

    I will try to address your query however a good article (that probably does a better explanation than me) can be found here:
    http://seekingalpha.com/article/135589-bailed-out-banks-how-they-stack-up

    ***

    As you are probably aware, preferred stock has characteristics of debt and equity.

    For my analysis, I made the following assumptions:

    1. Recognise that preferred stock has higher liquidation preference to common stock.

    2. Polarise things and treat preferred stock as equity.

    Let's look at SNV as one example.

    TARP "investment" by the US Govt was
    967 million.

    Market cap = 1.07 billion.

    Therefore even though the market cap of the common stock is 1.07 billion, the US Govt has a liquidation preference of 967 million, which means that there is very little left over for common shareholders.

    Although assumption #2 above is a little simplistic, CIT is another good example to look at.

    If the debt for equity swap goes ahead, then common shareholders will get roughly 2% of equity in the new capital structure, whereas preferred shareholders will get approximately 7%.

    Alternatively in a bankruptcy situation, CIT common shareholders are very likely to get zero, and CIT preferred shareholders might get some scraps if there are any left.

    So how can this information be used for investment decisions?

    Consider short positions in companies where you consider the ratio of TARP "investments" to market cap to be "high".

    This analysis was very useful in the days leading up to Friday 27 Feb 2009, when Citigroup announced the conversion of US TARP preferred stock into common equity.

    The reaction of the common stock on that day suggested that "investors" were not treating the TARP preferred stock as equity before that date.


     
    #16     Oct 31, 2009
  7. m22au

    m22au

    #17     Oct 2, 2011