Corporate News

Shares of Bank of America (NYSE: BAC) closed down 26% today after reporting disappointing earnings, announcing a $10 billion common stock offering and announcing a 50% dividend reduction.

After the close, BofA surprised Wall Street with the early release of their Q3 results. The results were disappointing to say the least. BofA reported third quarter net income of $0.15 per share, well below the consensus of $0.62 and down a whopping 82% from last year. The drop in earnings was driven by a significant increase in loan provision expense.

BofA also announced two initiatives to raise capital, targeting an 8 percent Tier 1 capital ratio. First, the company announced plans to sell $10 billion in common stock. Second, the company cut their quarterly dividend from $0.64 per share to $0.32. The company said the dividend cut will add $1.4 billion in additional capital per quarter.

The stock offering for BofA didn't go well. The pricing of the offering was cut numerous times as demand was slow to develop. At the close, it is said the deal is now oversubscribed in the $22-$23 range, below the $23.77 close.

CEO Ken Lewis said it is important to be at or near their 8 percent Tier 1 capital ratio target given the recessionary conditions and outlook for still weaker economic performance which they expect to drive higher credit losses and depress earnings.

BofA also said its consumer credit card business experienced a decrease in purchase volumes, slowing repayments and increased delinquencies during the quarter.

On a positive note, BofA is benefiting from consumer and business flight to safety, as shown by year-over-year increases in loans and deposits. Retail deposits increased $56 billion to $586 billion from June 30 to September 30, 2008, which includes of $35 billion in deposits from Countrywide.

Commenting on the results, Deutsche Bank's banking analyst Mike Mayo highlighted credit quality as an issue. Mayo noted that problem assets increased 37% in only three months. Mayo said loan issues were not just residential mortgages, but included commercial real estate, small business, credit cards and home equity loans. The firm lowered their price target on BofA from $28 to $26, while maintaining a Hold rating.

Philadelphia Consolidated Holding Corp. (Nasdaq: PHLY) reported its initial estimate of losses attributable to Hurricane Ike. Although claims information is preliminary, the Company estimates its net pre-tax losses to be approximately $22.0 million. In addition, as a result of utilizing certain catastrophe reinsurance coverage in connection with this hurricane event, the Company will also recognize approximately:

$1.2 million, pre-tax, of net reinstatement reinsurance premium expense; and $4.1 million, pre-tax, of accelerated reinsurance premium expense which the Company would have otherwise been required to expense over the remaining reinsurance contract period.

The estimated reduction of third quarter net income as a result of Hurricane Ike is approximately $17.6 million.

In connection with recent developments in the financial markets, the Company also commented on its investment exposure to several specific entities. The Company has current direct holdings of fixed maturity securities issued by Lehman Brothers Holdings Inc. and its subsidiaries of $8.5 million (par amount) within its fixed maturity investment portfolio. The Company intends to record a $7.4 million, pre-tax, other-than-temporary impairment loss on this Lehman investment in the third quarter. The Company has no investments in fixed maturity securities issued by AIG or Washington Mutual, Inc. The Company has no direct holdings of preferred or common shares issued by Lehman Brothers, The Federal National Mortgage Association ("Fannie Mae") or the Federal Home Loan Mortgage Corporation ("Freddie Mac"). During the third quarter, the Company sold all of its common stock investments in AIG and WaMu, realizing pre-tax losses of $6.1 million and $1.4 million, respectively.[SM]

Vonage Holdings Corp. (NYSE: VG) announced revised terms for its proposed debt financing with Silver Point Finance, LLC. The Company previously announced the terms and conditions for up to $215 million in private debt financing consisting of a $95.0 million senior secured first lien credit facility and the sale of $90.0 million of convertible secured second lien notes due 2015. The proposed debt financing also contemplated assembling a syndicate of other lenders to provide up to $30 million of an incremental senior secured first lien credit facility.

The private debt financing led by Silver Point is now expected to consist of a $130.3 million senior secured first lien credit facility, a $72 million senior secured second lien credit facility and the sale of $18 million of convertible secured third lien notes due 2015 with an initial conversion price of approximately $0.29 per share of common stock. Some of the other terms of the financing have changed, including the interest rates under the facilities and the convertible notes.

The Company intends to use the net proceeds from the financing, plus cash on hand, to repurchase its existing convertible notes in a tender offer that the Company commenced on July 30, 2008.

Vonage Holdings Corp. (Vonage) is a provider of broadband Voice over Internet Protocol (VoIP) services to residential and small business and home office customers. [SM]

Hungarian Telephone and Cable Corp. (NYSE: HTC) announced today that, at this time, in light of the current period of uncertainty in financial and economic conditions, it will continue to pursue its strategy as a publicly traded company while continuing to consider initiatives to enhance shareholder value.

Hungarian Telephone and Cable Corp. (HTCC) is a telecommunications provider operating in Hungary through its subsidiary and brand Invitel.[SM]

Force Protection, Inc. (NASDAQ: FRPT) received a letter from the NASDAQ Listing Qualifications Hearings Panel stating that it had determined to continue the listing of the Company's securities on the Nasdaq Stock Market because Force Protection has filed its Annual Report for the fiscal year ended December 31, 2007 and the Quarterly Reports for the first two quarters of 2008 with the Securities and Exchange Commission.

Force Protection, Inc. is a designer, developer and manufacturer of life saving survivability solutions and equipment, predominantly ballistic- and blast-protected wheeled vehicles currently deployed by the U.S. military and its allies to support armed forces and security personnel in conflict zones. [SM]