Well, Henry Blodgett laid out a BofA plan yesterday
Posted by
Brian (aka trav007)
Aug 24 '11, 12:21
|
You may think it's good, or bad, but it's other than A or B:
Seize the bank
Issue a statement saying that the bank's senior debt obligations and contracts and deposits will be honored and all of the banks businesses will continue to operate as usual during a temporary "workout period" (this will reassure senior bondholders, depositors, and customers, so they don't freak out and yank their money.)
Suspend trading of Bank of America's stock, which will be rendered worthless. (If you feel the need to throw shareholders a bone even though they'd have lost everything eventually anyway, promise them warrants in the new capital structure)
Fire senior management
Hire a team of conservative, independent analysts to quickly assess the value of Bank of America's assets. Tell them to err on the conservative side.
Write down the value of Bank of America's assets by whatever it takes to make the balance sheet bombproof�focusing on second mortgages, commercial real-estate, European obligations, goodwill, and other "assets" that the market is skeptical about
"Haircut" the unsecured creditors by whatever amount is necessary to close the gap between the asset writedown and the equity (BOFA currently has $222 billion of equity, so there's a lot to work with).
Inject $300 billion (or some multiple of the asset write-off) of fresh capital into the bank in the form of preferred and common stock�enough to make the bank extremely well-capitalized
Hire new senior management
Issue new common stock with the Treasury initially owning 100% of it
Sell 20% of this common stock on the public market
Eventually, when things have calmed down, sell the rest
|
Responses:
|
