Replies to post #1822 on Bankruptcy Q Players (BQP)

[Mutz]

I appreciate your thoughts. Thanks for responding.

[Enterprising Investor]

CIBH - Bank reorganizes in Chapter 11 without failing.

This is very rare.

CIBH filed a pre-packaged Plan of Reorganization. The cause was primarily due to its inability to pay approximately $43.5 million of aggregate accrued interest payable on its Junior Subordinated Debentures issued in conjunction with four tranches of TruPS. Under the Plan, the Debentures were exchanged for Series A 7% fixed rate noncumulative perpetual preferred stock with a stated value of $1,000 per share and Series B 7% fixed rate convertible noncumulative perpetual preferred stock with a stated value of $1,000 per share. Each share of Series B Preferred would be convertible into 4,000 shares of CIB Marine common stock only upon the consummation of a merger transaction involving CIB Marine where CIB Marine is not the surviving entity. If all Series B Preferred shareholders were to convert their shares in connection with a merger, they would own 49% of the total outstanding common stock and have a right to participate at that level in any merger consideration paid to acquire CIB Marine. There is no stated redemption date and holders would have no right to compel the redemption of any or all of the shares. Further, dividends would be noncumulative, and payable only to the extent CIB Marine declared a dividend at its discretion, subject to regulatory approval.

Under the Plan, the TruPS Holders exchanged $107.2 million of cumulative high-interest Debentures, comprising $61.9 million principal and $45.3 million of accrued interest, for shares of CIB Marine Preferred valued at $51 million.

The Plan was confirmed on 10/29/09 and was effective 12/30/09.

Sterling Savings Bank and AmericanWest Bancorporation also used bankruptcy, but I know of no other case in which common stockholders retained 51 percent.

http://online.wsj.com/article/SB10001424052748703675904576063852045473950.html

I consider CIBH a higher-risk bank play, but much less risk that buying common in some non-bank operating under Chapter 11.

Once the Consent Order can be lifted, I envision CIBH becoming an acquirer of community banks through FDIC-assisted transactions, similar to FCAL (and potentially in the future PCBC).

I am a banker. Mrs EI and I have combined 46 years in the business.