Capital Crossing: Is It Buyout Bait?

You probably won't come across Capital Crossing Bank (CAPX ) for your banking needs: It's something of a last resort for commercial and investment banks: These big institutions sell hard-to-collect loans to Capital for a good deal less than the amount of the outstanding balance. This niche business has been a nice moneymaker for Capital. Little wonder that Capital stock has outperformed that of most other banks, leaping from 16 on Sept. 21 to 27 in mid-April, before easing to 23 on May 1. Capital should earn $3 a share this year and $3.50 in 2003, figures investment pro James Awad, who heads Awad Asset Management, which owns 11% of the stock.

He hasn't unloaded his stake--partly because he thinks Capital is "attractive takeover prey." A much-sought-after buyer of unwanted loans, Capital has become a useful ally of Citigroup, Goldman Sachs, Lehman Brothers, and others. They usually sell some of the loans they end up with from acquisitions. "If Capital's Chairman and CEO Nick Lazares and co-CEO Richard Wayne decide to sell, any one of the larger financial firms would be a buyer--in a heartbeat," says Awad. He figures Capital is worth 27 to 38 a share, based on 1 1/2 to 2 times its book value of $19 a share. Lazares and Wayne say that they are not ready to sell. "We're still building up the company," says Lazares.

By Gene G. Marcial

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