Southeast Banking Corp to be rescued
by Richard Kilner
Story link: Southeast Banking Corp to be rescued
Southeast Banking Corp may finally be able to return to the black after a decade and a half of struggling with bankruptcy.
It filed for bankruptcy in 1991, when its main subsidiary, Southeast Bank, was seized by the government.
Since then creditors have been paid with the proceeds of assets sales.
An unnamed investment bank, based in New York, is speculated to be about to invest $1.5bn in the ailing financial institution.
Under the deal, it is thought that Southeast would undergo serious reforms and return to operating as a business, though not as a bank.
The struggling firm has other branches besides banking (which it is no longer chartered for), including insurance.
Those who presently possess stock in the firm will be issued with new stock.
In September 2007 the bank was recategorised from a Chapter 7 liquidation to a Chapter 11 reorganisation.
One of the attractions to a prospective buyer are the low income tax rates caused by using ”loss carry-forwards” which apply past losses to future profits.
A number of legal concerns are to be addressed, but the takeover is predicted to occur in the early part of 2008.
The unknown investment bank will receive preferred stock and common stock (22.5% of the new common stock), and new stock will be issued.
Those already with stock will receive 52.5% of the new common stock, with a predicted value of $10.9m after five years.
Creditors, and bondholders, will receive the remaining 25%.
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