Regions Denies Reports That Morgan Keegan Is For Sale
Regions Financial Corp., whose investment arm Morgan Keegan is at the center of hundreds of lawsuits and arbitration complaints over a group of collapsed bond funds, says it has no plans to sell its Memphis-based brokerage - for now anyway.
Regions is responding to a loss analysis story that appeared last week in American Banker. The story intimated Regions could be forced to sell Morgan Keegan in order to secure additional capital.
In May, Regions announced plans to raise $2.5 billion in new capital to comply with government mandates relating to stress tests of U.S. banks. Less than a month later, Regions raised the necessary capital but only after deeply discounting bank shares by nearly 25% in a stock offering. According to the American Banker article, Regions may not be able to repeat that particular capital-raising scenario in the future.
On July 1, Regions Financial stock closed at $3.97; one year ago, the stock was trading at $11.97.
As for Morgan Keegan, it has been on the losing end recently of recent arbitration awards concerning several proprietary high-yield funds that bought toxic waste assets. Losses in the funds-more than $2 billion between March 31, 2007, and March 31, 2008-ultimately were linked to highly risky and untested types of investments, including subprime mortgage securities, collateral debt obligations (CDOs) and other toxic debt instruments.
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