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I'm surprised not more is being said about the TNW reduction being negotiated in the facility restructure. A lot has been said about how precarious SFI is sitting when it comes to violating current TNW ratios. The talked about reduced TNW test will allow tremendous greater flexibility to consider every avenue open for repurchases of debt/equity, etc., won't it?
I'm a little concerned that they want to reduce the TNW covenant down to 1.5 billion. That's a reduction of 900 million from the current value. Do they expect to lose 900 million from here?
BTW I'm astonished that these shares are trading at this level. To me, this report cinches it for SFI. There is no doubt in my mind that this company is not only going to be here a year from now, but making more money per share than ever before.
I'm very happy that we received such a cold reception on this quarter. Let's keep this going as long as possible. When Wall Street wakes up, Istar will have half the float, less leverage, and making great money in a desperate borrowing climate.
I'm happy for the TNW covenant to go as low as possible. That does not mean that they are shooting for that number, but rather that they want that much flexibility. Breathing room is always nice, especially in a finnacial crisis. It alows them the luxury of extra time to work on their many issues by not forcing them to take drastic actions simply to avoid breaking that covenant.
So what if TWN drops to $1.5B. That gives about $15 book value per share right now and likely higher in the future with stock buybacks. Speaking of which, stock buybacks at these levels are fantastic for future earnings growth, but they do decrease TNW. A lower covenant allows for greater stock buybacks and great future EPS. Even without any additional buybacks are you seriously telling me that you would be concerned about going to $15 book value per share? If so, get a grip!
I don't think iStar anticipates a reduction in TNW to that level, on the other hand it gives them flexibility.
A TNW covenant is much more important to an unsecured lender than a secured lender, who is protected by specific, rather than general, collateral.
here's the little restructure snippet:
"The secured facilities would also include covenant modifications. We would anticipate that required minimum consolidated tangible net worth requirement would be $1.5 billion versus $2.3 billion currently. Required minimum fixed charge coverage would be 1 times versus 1.5 times currently. Maximum total debt to net worth remains same at 5 times, and minimum unencumbered assets on secured debt ratio remains the same as well, at 1.2 times."
vastly more flexibility.
Like your snippet - I have a couple
We also purchased 29 million common shares during the year under our share repurchase programs. (This does not note anything purchased this year - if any - and they definitely stated they want to buy more. There is a confirmed reduction in SFI shares by 22% - for every 4 shares available - there are only 3 available now and the fewer shares - a 22% increase in divi when it comes.)
Net investment income for the year was $982 million versus $686 million last year. (THEY MADE 300 MILLION MORE THIS YEAR THAN LAST.)
Results for the year included $1 billion of loan loss provision, $335 million of impairment - (They wrote off 1.3 BILLION in 2008. Now some of it is paper losses and will be lost, but there is a poop load of cash sitting and eventually it has to be recognized as earnings/buyback/repurchase cheap debt, etc - all of which are positive for the shareholders.)
We expect to continue to de-leverage in 2009 as we shrink the balance sheet through asset repayments, resolve a portion of our NPL and REO assets and pay off existing debt maturity. (Self explanatory.)
It's not being said to keep the price down. There has been a big push on financials - spouting everything negative they can think of. Do you honestly think that analysts don't see what is so clearly visible to anyone doing DD? IMO, 4th qtr almost assures SFI survivability - stable credit line and they can buy their way out at a sweet small interest rate. The numbers clearly show SFI is making money - it's just being written off by accounting rules that are simply crazy - but has worked out well for SFI since they are repurchasing at an even sweeter price.
As I said at the end of the 3rd qtr - 1st qtr 09 could be profitable and 2nd qtr is likely. Quad and I have said it in the past and we both believe the odds have improved to 1st qtr likely (at least 51%/49%) pos and 2nd qtr very likely (67%/33%) - this is barring a full blown out and out depression and relatively status quo hard recession continues.
Come on, you can't love the stock and 'analyse' buy at 50, then wait till it hits a buck to downgrade. Nobody is that stupid. The big boys pick it up at those prices. Analysts are basically dirtballs. Hell, we've got scumbags here that try and scam a 1/4 penny - that's about all any message board could change a stock. The institutions set the price, the presentations and the news, not some dinky message board.