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September 07, 2005
More on Katrina's economic ripples
As noted in this earlier post, the closing of the credit-card issuer Capital One Financial Corp.'s purchase of New Orleans-based Hibernia Corp. had been delayed by the aftermath of Hurricane Katrina. Today, the parties to that transaction announced that Hibernia had agreed to a 9% reduction in the purchase price as the price of the deal was reduced to $5.0 billion from the original price of $5.35 billion. Cap One had planned to close its purchase of Hibernia this week, but the acquisition is now scheduled to close in the fourth quarter.
Speculation over Hibernia's fate over the past week had fueled sharp swings in the company's stock price and heavy trading in its short-term options. The stock price dropped about 10% last week, but then partially recovered on Tuesday as investors became more confident that the deal involving Louisiana's biggest bank in New Orleans and in Louisiana. It holds about 30% of the metropolitan area's deposits and around 20% of the state's deposits, and about 15% of the bank's total deposits are concentrated in the New Orleans area. Over half of the bank's 100 or so branches in the hurricane-ravaged area are still closed, which includes about 20 branches that were largely destroyed and, thus, will not reopen anytime soon.
For a more macro-update on how the markets are dealing with the aftermath of Hurricane Katrina, check out James Hamilton's erudite analysis.
Posted by Tom at September 7, 2005 10:02 AM
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