CapitalSouth Hires New Advisor, Contemplates Sale

CapitalSouth Bancorp, Birmingham, Ala., has hired Sterne, Agee & Leach Inc. as its financial advisor to assess strategic alternatives for the company, including a sale or merger. CapitalSouth is the parent of Mortgage Lion Inc., a wholesaler headquartered in Fitzgerald, Ga. In its third quarter 10-Q filing, CapitalSouth said it has decided to close Mortgage Lion and that action should be completed by the end of 2008. The company lost $5.3 billion for the third quarter of 2008, primarily to a noncash reserve of $5.1 million on its deferred tax assets. It is operating under a cease and desist order from federal and state regulators. The order requires CapitalSouth to raise capital. It had a rights offering for 7.5 million shares of common stock priced at $2 per share. When the offering expired on Dec. 8, only 1.867 million shares were subscribed for, with a value of $3.7 million, and the subscriptions came from the company's directors and senior management. CapitalSouth is doing a public re-offering where common shares will be offered to the public on a best efforts basis. This will terminate on Jan. 20, 2009.