At a time when the stock price of New York Community Bank is fluctuating from above $10 to less than $2, does anyone dare to step forward and "copy the bottom"?
Last night, as the New York Community Bank plummeted 40% again and was on the brink of survival, a once familiar figure on Wall Street - former US Treasury Secretary Munuchin resolutely took action
Liberty Strategic Capital, owned by Munuchin, led a group of investors overnight to inject over $1 billion into the New York Community Bank through equity trading, while effectively controlling the struggling lending institution.
The transaction announced on Wednesday also appointed former Director of the U.S. Comptroller of the Currency, Joseph Otting, as the new CEO of New York Community Bank. And now, less than a week has passed since New York Community Bank announced its CEO change last week
This major transaction caused the struggling US regional bank's stock price to soar after resuming trading overnight, and the consortium led by Mnuchin also instantly gained almost double paper profits, with the possibility of making billions of dollars more - provided that the bank in crisis will not collapse in the future
A "big bet" of $2 per share
Perhaps not many people would have thought that after more than three years of serving as Treasury Secretary under the Trump administration, Mnuchin would return to the spotlight of American public opinion and Wall Street with such a posture.
This financier, who had worked at Goldman Sachs for 17 years, is now working with his old ally Otting to rediscover the "game" they used to play - mining profits from a struggling bank
Before serving as the Treasury Secretary of the Trump administration, Mnuchin, a former Goldman Sachs partner and Hollywood financier, had acquired another struggling lending institution, IndyMac Bank, during the 2008 financial crisis. After the bank was taken over by the Federal Deposit Insurance Corporation (FDIC), a consortium led by Mnuchin took over and renamed it OneWest, also appointing Otting as CEO.
Later, they sold OneWest to CIT Group for more than twice the acquisition price, completed the cash out, and earned hundreds of millions of dollars.
Now, Munuchin and Otting seem to be planning to replicate the classic case of 16 years ago once again!
Unlike IndyMac, which is struggling with residential mortgage loans, the current predicament of New York Community Bank stems from financing for office and apartment buildings. Last week, the bank disclosed the existence of its loan monitoring system; Quota; Major defects; Quota;, And after causing rating agencies to further downgrade its credit rating, its stock price plummeted from about $13 last year to the overnight lowest of $1.70.
According to the latest information disclosed by the New York Community Bank on Wednesday, a consortium of Liberty Strategic Capital and other investors under Mnuqin will purchase the bank's common stock at a price of $2 per share and receive some convertible preferred shares at a conversion price of $2, raising a total of $1.05 billion. Although the bank's statement did not provide complete terms, the consortium will also receive warrants with an exercise price of $2.50 per share, in addition to common shares and convertible preferred shares.
This investment triggered a significant rebound for New York Community Bank after resuming trading, with its stock price reaching a 70% daily fluctuation and miraculously closing at $3.46.
Undoubtedly, if this rapidly falling flying knife can be successfully caught, Mnuchin's company and other investors who participated in the transaction will gain huge profits. Although it will take a few days for the transaction to be officially approved, their paper profits are almost equivalent to the principal.
And if they can pull the stock price back to the level of two months ago - then their earnings will exceed $5 billion.
It is reported that in the latest transaction, Liberty Strategic Capital, owned by Mnuchin, will invest $450 million. Other investors include Hudson Bay Capital, which invested $250 million, and Revenue Capital Partners, which invested $200 million. Ken Griffin, founder and CEO of hedge fund giant Castle Investment Group, also participated in the transaction.
Can the endorsement of the former finance minister win the bet?
In fact, as Mnuchin took on the role of a "white knight" and participated in the "rescue" or "bottoming out" of the New York Community Bank, the next question is whether the former US Treasury Secretary can win this banking "defense war" that the entire US banking industry is focused on?
Gary Townsend, founder of the family office GBT Capital Management, pointed out that from the timing of the capital injection, Mnuqin's involvement is undoubtedly timely. And Otting's appointment provides some regulatory bulletproof measures, he added, "With the support of the former Minister of Finance, there can always be no mistake."
Mnuchin, who is now 61 years old, left the US Treasury Department in 2021 and subsequently raised a large amount of funds for Liberty from Middle Eastern sovereign wealth funds, including the Saudi Public Investment Fund (PIF). Now, his company is engaged in the most anticipated US banking transaction of the year.
Analysts say that the capital injection from these conglomerates may lead to a major regulatory capital ratio of over 10% for New York Community Bank, aligning it with similar regional banks with assets exceeding $100 billion.
As of the end of 2023, the common equity Tier 1 capital ratio of New York Community Bank was 9.1%, which is the lowest among similar banks. Despite the recent capital injection by a consortium, if the bank had to significantly increase its reserves again this quarter, it could erode the buffer zone brought about by the injection. The nearly $400 million increase in reserves in the previous quarter led to large-scale losses.
Industry analyst Herman Chan pointed out that although this transaction "significantly" dilutes the shares of existing shareholders, if Otting can successfully reverse the company's crisis situation, they may also benefit from it.
He said, "This may be difficult for shareholders to accept, but it does give them some time to solve all the problems. Now, Otting has a lot to do, including further enriching capital, reducing commercial real estate risks, and ensuring that employees and depositors stay."
Mnuchin's career began in the early 1980s when he was only an intern at Solomon Brothers. Afterwards, he worked at Goldman Sachs Group for 17 years, serving as the head of the mortgage department and other positions. He ultimately left Goldman Sachs Group and co founded the hedge fund Dune Capital Management in 2004. Over the years, he has also provided a large amount of funding for Hollywood movies, including films such as "Wonder Woman", "Captain Sally", and "The Return of the Crisis".
Dune also leads an investor alliance, which includes the family offices of George Soros, renowned hedge fund manager John Paulson, and billionaire Michael Dell.
Last year, several US banks, represented by Silicon Valley Bank, went bankrupt due to rising interest rates eroding the asset value on regional bank balance sheets. But at that time, Mnuchin's Liberty Strategic Capital failed to seize this bottom opportunity. At present, the New York Community Bank is also facing difficulties due to commercial real estate. If Mnuqin can turn the situation around, it may now provide him with a long-awaited opportunity.
Some of Mnuchin's former colleagues have expected him to achieve this. "In the United States, no one can solve problems better than Steven Mnuchin," said Brian Brooks, who previously served in the Treasury Department led by Mnuchin
However, it is still necessary to remind people that last night's transaction does not necessarily mean that New York Community Bank has completely turned the tide!
In fact, aside from the halo of Mnuqin, in the eyes of some industry insiders, the current situation of New York Community Bank is almost exactly the same as that of Silicon Valley Bank a year ago - Silicon Valley Bank serves technology companies and venture capital firms. Shortly after the bank announced its public offering (on the same day), the bank disclosed that one of its asset sales included a loss of nearly $2 billion. The stock price of Silicon Valley Bank subsequently plummeted, accelerating the outflow of bank deposits.
A few days later, Silicon Valley Bank was taken over by FDIC