Capital Source (NYSE:CSE) Improves Financial Flexibility

Noteholders of a 12.75 percent Senior Secured note due in 2014 approved an amendment improving the financial flexibility of Capital Source (NYSE:CSE).

FBR Capital commented, "We reiterate our Outperform rating on shares of CapitalSource following the announcement that the noteholders of the 12.75% Sr. Secured Note due in 2014 have approved an amendment that substantially improves CSE's financial flexibility. In addition to permitting the use of cash to meet convertible debt redemption obligations, which we expected, CSE was able to obtain the ability to repurchase shares, downstream capital to the bank and leverage assets at the holding company. Concurrent with the amendment announcement, CSE announced a $150M share repurchase program (- 7% of shares at current price) over a period of up to two years. We view the amendment as providing substantially more flexibility than we had expected and therefore a significant positive for the shares. The increased financial flexibility also alleviates investor uncertainty with regard to how CSE was going to resolve its over-capitalized position (projected 23% TCE ratio by FYE11), thereby providing a clearer path to improved ROE's."

FBR maintains their "Outperform" rating on Capital Source, which was trading at $6.90, up $0.11, or 1.62 percent, as of 12:18 PM EST.