March 14, 2008

Bear Stearns! Bear Stearns! Bear Stearns!

What can I say? Their options are limited:

  • Find a parter – e.g., sell out to JPMorgan at a price of about maybe $27 – this is about $60 less than book.
  • Hold a fire sale of assets. Then watch the business die.
  • Go broke.

Whatever they choose, common shareholders are dead. The only question is whether the franchise will survive. I suspect that it will … there’s a gun to the directors’ heads, because trying to tough it out will just destroy their business before the month is out. There’s a lot of franchise value in Bear Stearns … so they have to go cap in hand to every major investment bank in the world, and desperately hope that at least two of them show an interest. As clearing bank, JPMorgan is most familiar with the assets – if they want it.

Another day of light action in the preferred market, with PerpetualDiscounts down again. CIBC was busy!

Note that these indices are experimental; the absolute and relative daily values are expected to change in the final version. In this version, index values are based at 1,000.0 on 2006-6-30
Index Mean Current Yield (at bid) Mean YTW Mean Average Trading Value Mean Mod Dur (YTW) Issues Day’s Perf. Index Value
Ratchet 5.45% 5.47% 32,265 14.70 2 -0.5874% 1,092.2
Fixed-Floater 4.75% 5.52% 62,586 14.84 8 +0.2274% 1,047.1
Floater 4.77% 4.77% 81,539 15.94 2 -0.2926% 870.9
Op. Retract 4.85% 3.27% 74,673 2.74 15 +0.0711% 1,044.5
Split-Share 5.39% 6.00% 95,407 4.15 14 -0.3588% 1,022.2
Interest Bearing 6.19% 6.65% 67,187 4.22 3 +0.1359% 1,082.8
Perpetual-Premium 5.77% 5.37% 271,543 8.81 17 +0.0232% 1,021.8
Perpetual-Discount 5.52% 5.57% 307,285 14.54 52 -0.1426% 934.8
Major Price Changes
Issue Index Change Notes
BMO.PR.K PerpetualDiscount -2.1053% Now with a pre-tax bid-YTW of 5.70% based on a bid of 23.25 and a limitMaturity.
SLF.PR.A PerpetualDiscount -1.7156% Now with a pre-tax bid-YTW of 5.45% based on a bid of 21.77 and a limitMaturity.
BNA.PR.B SplitShare -1.4706% Asset coverage of 3.3+:1 as of January 31, according to the company. Now with a pre-tax bid-YTW of 8.42% based on a bid of 20.10 and a hardMaturity 2016-3-25 at 25.00. Compare with BNA.PR.A (5.91 to hardMaturity 2010-9-30) and BNA.PR.C (7.23% to hardMaturity 2019-1-10).
WFS.PR.A SplitShare -1.4213% Asset coverage of 1.7+:1 as of March 6, according to Mulvihill. Now with a pre-tax bid-YTW of 6.19% based on a bid of 9.71 and a hardMaturity 2011-6-30 at 10.00. 
ELF.PR.G PerpetualDiscount -1.3326% Now with a pre-tax bid-YTW of 6.29% based on a bid of 19.25 and a limitMaturity.
HSB.PR.C PerpetualDiscount -1.2706% Now with a pre-tax bid-YTW of 5.48% based on a bid of 23.31 and a limitMaturity.
HSB.PR.D PerpetualDiscount -1.2420% Now with a pre-tax bid-YTW of 5.43% based on a bid of 23.06 and a limitMaturity.
FBS.PR.B SplitShare -1.0526% Now with a pre-tax bid-YTW of 6.62% based on a bid of 9.40 and a hardMaturity 2011-12-15 at 10.00.
CM.PR.H PerpetualDiscount +1.1021% Now with a pre-tax bid-YTW of 5.78% based on a bid of 21.10 and a limitMaturity. 
ELF.PR.F PerpetualDiscount +1.4151% Now with a pre-tax bid-YTW of 6.28% based on a bid of 21.50 and a limitMaturity.
Volume Highlights
Issue Index Volume Notes
TD.PR.R PerpetualDiscount 225,910 CIBC crossed 90,000 at 24.90. Recent new issue. Now with a pre-tax bid-YTW of 5.65% based on a bid of 24.89 and a limitMaturity.
CGI.PR.A Scraps (would be SplitShare but there are volume concerns) 120,000 CIBC crossed 98,600 at 25.15, then another 25.15 at the same price. Asset coverage of 3.7+:1 as of January 31, according to Morgan Meighen (although you have to poke around a bit to determine this). Now with a pre-tax bid-YTW of 5.75% based on a bid of 24.95 and a softMaturity 2008-10-4 at 25.00.
BNS.PR.O PerpetualPremium 113,295 CIBC crossed 99,200 at 25.10. Now with a pre-tax bid-YTW of 5.66% based on a bid of 25.06 and a limitMaturity.
NA.PR.L PerpetualDiscount 35,800 TD crossed 29,500 at 21.65. Now with a pre-tax bid-YTW of 5.67% based on a bid of 21.58 and a limitMaturity.
IAG.PR.A PerpetualDiscount 30,000 Nesbitt crossed 27,900 at 20.80. Now with a pre-tax bid-YTW 5.51% based on a bid of 20.93 and a limitMaturity.
BNS.PR.L PerpetualDiscount 21,575 Now with a pre-tax bid-YTW 5.44% based on a bid of 21.00 and a limitMaturity.

There were nine other index-included $25-pv-equivalent issues trading over 10,000 shares today.

2 Responses to “March 14, 2008”

  1. madequota says:

    Well, you were a little off with the $27/share estimate . . . but you were quite right with the “common shareholders are dead” comment. $2 ?? Unreal.

    The only question now is this: what will the effect be on the markets? Will financials, and possibly some prefs, get spanked with the newly-proven reality that major financial companies can go broke? Or will the markets revel in the reality that we no longer have to listen to Bear-Stearns related ABCP woes?

    My Sunday night call on that? Market will sell off for about 15 minutes, probably in the 200 – 300 pts down range, driven primarily by the “bone-headed pretty boys”, and then the bargain hunters will step in and lead NY and Tor to 300 pt gains by the end of the day.

    Sigh . . . maybe I’m just a dreamer


    ps thanks for the final comments on the CIBC thing we were discussing Friday

  2. […] not as employees and creditors) were both limited and unpalatable – I pointed that out on March 14, but there is the question of the Japanese banks. Naked Capitalism – Why didn’t Bear use its […]

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