EOS Preferred Corp Series D Pfd (fka EOSPN)

[MrchntDeth]

Lehman's motion to be approved on Wednesday, September 22, 2010 (re: the "Capital Maintenance Agreement"), will leave Aurora FSB "highly capitalized" as per the motion.

Addtionally, the Agreement calls for Lehman to keep "Tier 1 Capital" at above 11% and "At Risk Capital" at above 15% for the duration (18 months) of the Agreement. In the meantime, Lehman gets to shop around a highly capitalized Aurora FSB to other interested banks over the next 18 months, and not at a fire-sale price.

After the motion is granted by Judge Peck, the initial Tier 1 Capital will be around 20%, IIRC, and should allow Aurora (EOSPN), to resume regular dividend payments. The purpose for the OTS poking its nose into Aurora's business goes away at the moment that the Lehman injects this additional (and substantial) capital into the bank, but this is not part of my equation in buying the shares at these prices; I am assuming no dividends and a redemption within 18 months.

BOTTOM LINE is that the EOSPN Preferred Shares will be taken out at $25.00. Buying them at this price is like buying a zero coupon bond @ $19.00 to $20.00, and having it redeemed @ $25.00 within the next 18 months, perhaps sooner. If dividends resume, it'll be icing on the cake.

I will let somebody else do the APR on this as I am somewhat mathamatically challenged, but I'll bet that the APR will be pretty high. And the sooner that EOSPN is redeemed, the higher the APR will be.

Besides, Lehman has already put in too much capital into Aurora and Woodlands to let these banks get confiscated by the FDIC/OTS; that is why Lehman is begging Judge Peck to allow them to put even more money into the banks, with Aurora getting almost a Billion Dollars more capital into its balance sheet!

Aurora WILL be sold within the next 18 months, and EOSPN shares will get taken out. If Lehman wanted to get rid of the CCPCN/EOSPN shares back in October 2008, the reason to redeem them now is even more compeling given that interest rates have dropped even further.

David

EOSPN