I worded something above very poorly. Ras sells floating rate investment grade bonds to finance its securitizations. These securitizations FL-1 through FL4 (so far) have been about 80% investment grade debt, and 20% Ras equity.
So, interestingly, the longer term permanent financing has permitted significantly more leverage than the short term financing (until now). That is usually not the case.
Ras and a number of its subsidiaries have two main securities purchase agreements with two major banks. UBS and Citi.
As part of these agreements, the banks provide wholesale lines of credit in order to help Ras subsidiaries originate loans on a leveraged basis. Up until now, the LTV on these lines was only 50%.
Ras originated two main types of commercial loans. The first is a fixed rate loan with loan maturities of 5 to 10 years. These loans are sold into securitizations created by the two banks. The second is a floating rate commercial loan that Ras puts into its own securitizations. Ras sells floating rate bonds that have typically been at 80% LTV.
The basic feature of the NEW agreement is that the banks will now lend on its wholesale warehousing lines provided to Ras ...........at 75% LTV. The main benefit to Ras is it ties up less company cash.
I hope that does an adequate job of explaining the deal.
I wish they had done this before issuing more shares......
We will see how management explains how the $ for the issue was used.
It would seem, based on this new agreement, that they are doing more lending than before. Or they are just planing on doing more and don't want to raise more capital to do it.
I will try to summarize in a separate thread.
Amazing that I get 3 thumbs down when I mearly state facts about the company activities...no opinion. It tells us something about some of the readers here.
I don't understand that 8K either. I could more easily learn Greek! If you understand it; and I think you do; could you write a short blurb on what it means to RAS. Otherwise, it becomes fodder for shorts to spin into something evil since they want to close out as cheaply as possible in the next couple days. I can certainly argue why management does care about shareholders; but it is amazing how many investors want to assume that everything mgt. does is to "hurt the shareholder"!
I don't understand the comment about "All these financial moves by mgt." Not sure what you mean? But it is easy to manipulate the irregular market periods and usually doesn't mean much; especially such a few shares. I think it is worth over 6 but the "real" market has not agreed, yet. Maybe it is about time.It would not surprise me to hit above 6 in the next couple days.
I would say that maybe some tax break could be there to encourage true commitment to long term success. Forget the options completely. Issue them shares that they pay at least 50% of current value for when received. No immediate income recognition on their getting the other 50%. Shares sold within 3 years taxed as ordinary income, including the 50% given to them. After three years, capital gain treatment allowed on sales. Or something like that. Rather than options, repriced if the stock price falls, with to generous tax benefits on the gains.
I would not doubt that SS is cashing out options for gains now despite the fact that the PPS has nosedived. And he is not alone. That repricing of options is done so that management always gets a nice lift even when the PPS has done poorly.
I Like This One 2 The discovery of truth is prevented more effectively, not by the false appearance things present and which mislead into error, not directly by weakness of the reasoning powers, but by preconceived opinion, by prejudice.
I don't think the company will last that long. I know I won't.
Ok, how about they foreclose, the local area continues to deteriorate. Rents go down, and renters are hard to find......is that a better bad scenario?
Hey, they already own some bad real estate. Look at their malls.
Lines 4-6 hit the nail on the head. However far from all inclusive. Too bad the nail got bent on his
hard head. HATES losing. MUST be right. Has to get in final word .& is extremely rude Goes viral
when challenged. Psychologists have names for this. Archie Bunker would probably just come up
with meathead. Curses me & calls me names for objecting to dilution. His remark "Everybody's
doing it, you are stupid, you should buy index funds."
I try to explain I've been around the block a few times & object to co's risk strategy. and ROC payout
which he says is actually earned. However there is NO REIT requirement for it to be paid, it reduces
reserves AND shareholder equity. That money could have been used for corp. purposes instead
of making dilutive 2014-5 money raise When I point out co giving money away than turns around
& raises capital seems illogical. He goes ballistic, not calmly but NASTY & ABUSIVE .
In fact the only reason ROC made was to get stock price up. It's a little trick companies do, Return
shareholders money & call it a dividend. In fact IRS does not regard it as a dividend at all
Funny thing it worked for awhile until shhldrs saw the horror show of losses & shhldrs exited & hft's
& shorts blasted stock.Our "boy" said it was not out of pocket losses & fools didn't understand it.
The net effect however was to weaken bal sh by $3.7BIL retained earning losses in 3 yrs . Through
all this genius rolled out statistic galore & impressed us with how HE was making money & wrote
100 30 sentence treatises which added up to one thing. Fancy verbage to promote stock
sme just informed us getting $9k div this1/4 which means he has 50ksh. no wonder he pumps
Eth is a little better.These dudes have a lot invested & defend position like the zaps on iwo jima
I iggified the 3 awhile ago . mb more pleasant place. sometimes i tune in to read bs
What will happen if the loan(s) within the securitization stop paying? Ras will foreclose. There will be less cash flow generated from the securitization and therefore Ras will make less money from the securitization.
Ras plans/believes that the foreclosed real estate will retain enough value to pay off the loans or generate enough cash to keep paying the bonds that the securitization issued. This is what happened with Rait 1 & 2.
To paint a negative picture and see how terrible things could go........Ras could foreclose and find that there is toxic waste on the property and not only do they get no money for it, but they need to pay money to clean up the sight😀
In any case, I think the point DF is that the leverage is somewhat misleading.
You're welcome, but it's Anne with an 'e'.
Miss Anne Elk. Not Mrs. and not an elk.
Proper way to pay executives is to give a portion of salaries in shares. That way their pay is tied to a company's performance. To give a bonus on top of the stock is excessive and as the study shows self defeating....but given the dearth of real executive talent and the cronyism between boards and executives, we all know the routine.......its why activist investors can sometimes be very effective.
if you want to compare a business operation over time normal metric would be peak interest rate to peak interest rate or trough to trough. This especially relevant for interest rate sensitive securities. Trough of last interest rate cycle was early 2003, by october 2005 fed funds were already over 5% well into mid cycle economy. My expectation is that as rates go up RAS performance will look better as the inceasing rates are indicative of an expanding economy with high demand for the loans rait specialize in.
Ten years ago, October 3, 2005, RAS shares closed at $28.42.
Allowing for the 1:3 reverse split, that would be $85.26 per share.
Or, if you prefer, one-third of a $5.17 share today would be a bit less than $1.73.
5.17 vs. 85.26 or 1.73 vs 28.42, either way, it's a net loss of 94%
Has RAS paid 94% in dividends over the same time period?
Look at it this way:
If you owned 3000 shares of RAS in October, 2005, worth $28.42 each, you'd have
1000 shares of RAS today, worth $5.17 each, and you would have collected
$64,710.00 in dividends thru July, 2011 ($21.57 per share on 3000 shares over 6 years)
$2,280.00 in dividends since July, 2011 ($2.28 per share on 1000 shares over 4 years)
for a cumulative value of $72,160 today (counting dividends)
to replace $85,260.00 you had in October, 2005 (3000 x $28.42).
That give you a "TSR" over 10 years of (minus) $13,100, or -15%.
A negative 15% "return".
Wow, what a deal.
Appreciate the info, begs another question...Non recourse part to Rait means no comeback if underlying property goes bust. Their 20 percent equity tranche goes on their books as a what?l liability that gets amortized or an asset that is depreciated....If the underlying on their tranche goes bankrupt they write it off (or up). and get the property and put it on their books at FMV?..
I assume that the basic business model is that the fee from the securitization pays for the majority of the equity tranche and gets recycled into new loans.
(which is why i was so caught off guard by the raise--though someone who is a really good business guy once said 'when things are going good you need money and when things are bad you need money')
I am glad I have your company to share the burden of informing this board's readers who are long that if and when RAS share price rises that it is a good thing.