National City Takeunder Financing, Steeper Than Steep (NCC)

National City Corp. (NYSE: NCC) is a name we have been cautious on because of the trends we have seen in the "bank financing" rescue packages.

The company has secured $7 billion in financing to keep the bank above water in the wake of the subprime mortgage crisis. Consair Capital, LCC contributed $985 million, taking a 9.9% ownership in the bank, while the rest came from various investors and institutional investors. Investors are getting a bargain at $5.00 per share on the 126.2 million shares being issued.

We recently warned in screening for our special situations newsletter and in screening for our "10 Stocks Under $10" weekly newsletter that when shares were at $8.60 the financing might be the next "takeunder financing" with prices much lower than the market was indicating.

In addition, National City announced a dividend cut from $0.21 to $0.01 in an effort to strengthen its capital position. The last two quarters, the bank reported losses of $333 million and $171 million, respectively, for EPS losses of $0.53 and $0.27, respectively. In the first quarter of 2007, National City posted earnings of $319 million and an EPS of $0.50. The company had previously announced that they have retained Goldman Sachs to explore strategic alternatives.

Shares dipping significantly in late morning trading, down over 25% to $6.12, a $2.20 drop on more than 100 million shares. The 52-week range is $6.56 to $38.32.

Jon C. Ogg
April 21, 2008