While other banks reviewed and turned down the opportunity to guarantee Convention Center Project bonds, Wachovia disregarded the grim findings of the PKF Feasibility Study and concerns raised by earlier market studies and took on the risk.
This type of ‘gun slinger’ banking has severely impacted Wachovia’s financial strength. According to Bloomberg.com, Wachovia has cut its dividend and will raise about $7 billion in share sales to replenish capital.
Sale of stock at this time is especially costly for Wachovia. According to Bloomberg, the “company’s market value has dropped 50 percent since its ill-timed $24.6 billion takeover of Golden West Financial Corp. in 2006 at the peak of the housing market.”
Wachovia is obliged to either renew its Convention Center Project bond guarantees or repurchase the bonds at the end of a five year period.
