Monthly Archive for January, 2011

Avoiding the Bank Crisis of 2015

London-based consulting firm Oliver Wyman recently launched their 14th annual State of the Financial Services Industry report, titled “The Financial Crisis of 2015: An Avoidable History” in Davos, Switzerland during the 2011 Annual Meeting of the World Economic Forum. Bloomberg has an article about it here.

The report imagines a scenario in which another world banking crisis ensues as a result of the popping of a commodity-fueled bubble. Most interesting about the report is the general suggestions for regulators and for financial institutions who want to uncover and remedy the weaknesses in the financial system. For example, the report suggests to regulators they need to spend as much time preparing for crisis scenarios as they do modeling the probability of them happening. I recommend reading the report in full.

Firefly Value Partners Acquires 5.7% of Alliance Bancorp, Inc. of Pennsylvania (ALLBD)

Firefly Value Partners Acquires 5.7% of Alliance Bancorp, Inc. of Pennsylvania (ALLBD).

Alliance Bancorp recently completed a second-step conversion from mutual holding company form to a stock holding company along with a concurrent public stock offering.

According to Alliance’s S-1 filings, price to tangible book right now should be about 65%, perhaps slightly higher given shares are trading above the offering price of $10 per share.

Interview With Phil Goldstein of Bulldog Investors

This is a great interview with Phil Goldstein of Bulldog Investors. Phil is an activist  value investor with an excellent track record.

Senator Investment Group LP Acquires 8.59% of Essex Rental (ESSX)

Senator Investment Group LP Acquires 8.59% of Essex Rental (ESSX).

Essex says it owns one of the largest rental fleets of heavy lift crawler cranes in North America. Here are some other tidbits from its investor presentations:

  • 350 cranes and attachments
    • Orderly liquidation value of > $262 million and estimated replacement value of $450 million to $500 million
  • #1 North American “bare” crawler crane rental company
  • 50-year operating history
  • 109 employees

According to Yahoo Finance, enterprise value is about $250mn, which gives us a 50% discount to replacement value.

Longleaf Partners 2010 Annual Letter Available

The Longleaf Annual Report Letter to Shareholders is now available.

In Nuclear Silos, Death Wears a Snuggie

I thought this was a real interesting article from Wired:

After nearly four years of pulling ICBM-alert duty, this process is instinctive. I deliberately recite the encrypted characters to ensure my deputy is on the same page, literally and figuratively, as six short characters can effectively communicate a wealth of information through the use of special decoding binders. “Charlie, Echo, Seven, Quebec, Golf, Bravo, six characters ending in Bravo.” My partner concurs, scribbling in his code book.

“Crowd pleaser,” he adds without emotion, referring to a war plan that mandates immediate release of our entire flight of nuclear missiles, 10 in all.

Of course, this is just a training scenario. The coded orders are a simulation. The console is a mockup of the real thing, stowed away in a larger hanger and serviced seven days a week by a small staff of Boeing contractors.

If this were a real event, I’d be buried in a steel cocoon 100 feet underground. I’d have shed my standard-issue flight suit and boots. Instead, I’d be wearing sweats, fleece-lined slippers and, naturally, my indispensable, royal blue Snuggie.

RockTenn (RKT) and Smurfit-Stone (SSCC) Agree to Merge

Via DealBook, “2 Top Package Companies to Merge”:

The merger will combine two of the biggest names in packaging, creating a company with 9.4 million tons of production capacity. It will also expand RockTenn’s business in the Midwest and West Coast. The combined company will keep RockTenn’s headquarters in Norcross, Ga.

The deal appears in some ways to be a bet that consumers will increase their buying and need for shipping products.

It also comes about two years after Smurfit-Stone filed for bankruptcy during a wave of big Chapter 11 filings. Through the bankruptcy process, the company shed billions of dollars in debt.

Under the terms of the deal, RockTenn will pay 0.30605 of its own shares and $17.50 in cash, or $35 a share at Friday’s closing price, for each Smurfit-Stone share. The price represents a 27 percent premium to Smurfit-Stone’s Friday closing price of $27.52. RockTenn will also assume $1.8 billion of Smurfit-Stone’s debt and pension liabilities.

This just goes to show that post-reorg companies can be a great opportunity. No matter how crappy they were before or that they’re still in a crappy industry, bankruptcy is inevitably a cleansing process. Upon emergence, the company has been scrubbed and scrutinized, which paves the way for outperformance in the public markets or makes the company more attractive to potential acquirers.

Watching Out For Loaded Words

This Time article is from 1982 and is even more relevant today than it was then, simply because of the leaps and bounds by which technology has progressed along with the political and financial interests at stake.

The trouble with loaded words is that they tend to short-circuit thought. While they may describe something, they simultaneously try to seduce the mind into accepting a prefabricated opinion about the something described. The effect of one laden term was incidentally measured in a recent survey of public attitudes by the Federal Advisory Commission on Intergovernmental Relations. The survey found that many more Americans favor governmental help for the poor when the programs are called “aid to the needy” than when they are labeled “public welfare.” And that does not mean merely that some citizens prefer H/2O to water. In fact, the finding spotlights the direct influence of the antipathy that has accumulated around the benign word welfare.

Every word hauls some basic cargo or else can be shrugged aside as vacant sound. Indeed, almost any word can, in some use, take on that extra baggage of bias or sentiment that makes for the truly manipulative word. Even the pronoun it becomes one when employed to report, say, that somebody has what it takes. So does the preposition in when used to establish, perhaps, that zucchini quiche is in this year: used just so, in all but sweats with class bias. The emotion-heavy words that are easiest to spot are epithets and endearments: blockhead, scumbum, heel, sweetheart, darling, great human being and the like. All such terms are so full of prejudice and sentiment that S.I. Hayakawa, a semanticist before he became California’s U.S. Senator, calls them “snarl-words and purr-words.”

Not all artfully biased terms have been honored with formal labels. Word loading, after all, is not a recognized scholarly discipline, merely a folk art. Propagandists and advertising copywriters may turn it into a polished low art, but it is usually practiced—and witnessed—without a great deal of deliberation. The typical person, as Hayakawa says in Language in Thought and Action, “takes words as much for granted as the air.”

Atlantic Southern Bank CEO Leaves; Bank Voluntarily Delists Stock From Nasdaq

More evidence that it is only a matter of time before Atlantic Southern goes away:

I think its very likely Mark Stevens is jumping from a sinking ship to a ship that will very likely become a powerful regional institution. Who can blame him? Would you want to be associated with a failed bank? And as for the stock delisting, they cite costs and failure to meet the listing requirements. If they were concerned about costs, I question why they did not do this a year ago.

So lets depart from the qualitative reasons Atlantic Southern is likely to fail and get to the quantitative reasons. Continue reading ‘Atlantic Southern Bank CEO Leaves; Bank Voluntarily Delists Stock From Nasdaq’

Unofficial Problem Bank list increases to 937 Institutions

Via Calculated Risk, the unofficial problem bank list increased to 937 institutions, with eleven being added and seven being removed. Follow the previous link for more information.

On a personal note, I’m still waiting for the FDIC to do something with Atlantic Southern Bank, one of the problem banks from my hometown of Macon, Georgia. I’ve posted several times on this blog since the summer of 2009 that it’s only a matter of time before Atlantic Southern is taken over by the FDIC or another bank.