I am very reluctant to catagorize the sale as distressed. I believethat this action was anticipated when they entered into the deal. The fact that in 1.5 years they were able to realize this kind of a gain and to have the ability to liquidate the property as a measure to blunt any potential action by Fitch simply reinforces my faith in management and their statement that they have a bullet proof balance sheet. I don't think the stock will move a great deal until the recession is announced and the credit crisis begins to resolve itself. The dividend remains aecure, there is cash to fund additional deals and life remains good.
I don't think you sell an asset at a time where the underlying commodity represented by that asset is at multi-year lows.
Unfortunately, to my way of thinking, much larger gains were in the future had SFI held the timberlands but SFI needs the free cash flow from the sale of timberlands now. Unfortunately, SFI's stock price is reflecting causes for concern that the sale of timberlands confirms to me.
The sale of timberlands avoids the necessity for a full on dilutive equity offering; perhaps a smaller convertible preferred will be needed.
I would suggest and submit that SFI does not have free cash flow to make new investments at this time. I think SFI's focus will be on strengthening its balance sheet for Fitch and the ratings agencies and the banks.
SFI mgmt has been a bit cagey at the last two cc's relating to Fremont's valuation. Mgmt has said Fremont assets are performing as expected and yes Fremont's earnings allowed for the year end supplemental dividend but the issue is the valuation of Fremont and whether SFI overpaid and jumped too soon.
The timberland sale comes not long after the last equity offering. I think ferdie has hit the nail on the head. You don't sell assets when they're at lows unless you need the money, especially assets like timberland, which has been touted as a great portfolio diversifier by successful investors like the Yale Endowment fund. (Looks like I'll be doing this transaction in-house, since the timberland moves over to the Manulife side of my ledger.) Just my opinion.