Hi everyone, NMB and I go way back. I don't have near his insight on these things but I'm blessed that he'll share his insight. Here is an email from him:
They won't and can't do anything more than say they are looking at it until they do it. I called IR and tried to get something out of him regarding timing .. but he's a poker-faced professional (as one would expect him to be) so nothing there.
He did say they are first focused on their bond rating/investment grade rating. By refinancing at competitive rates, like they just did, they feel that will help them improve their investment grade and that will in turn allow more institutions to come to the stock. I think it will help a little, but the dynamics of the NAV vs distributable income won't be over come by an upgrade IMO.
At the same time, they are doing the work that it takes to possibly reorg in the background, which is aligning all the control companies into an integrated accounting system, and accounts, so that roll-up financials are possible and finally retiring the BLT debt this quarter, which encumbers assets to a possible realignment.
They simply are not going to produce enough income to distribute to get the PPS over NAV, without aligning the income producing NAV with the income in a separate entity given the competitive landscape (again IMO). I'm still hoping for something in 2014, if not completion, an announcement.
I've been way too busy and away to contribute on the board. Please send my regards and repost this email if you'd like. Most on the board know we go way back and would trust your repost.
So Now that the Bond offering is out .. I don't think the B3 rating is the vote of confidence from Moody's that ACAS was looking for .. or enough to draw investors into the equity.
The fact that they could do this unsecured offering at all is an accomplishments of some sort certainly, but as far as ACAS' other milestones it seems anticlimactic.
B3 is the lowest grade in the "highly speculative" category and IMO (which take with a grain of salt as I am not a bond investor at all). Even their secured debt only rates a B2 .. one step higher but still at the bottom of highly speculative.
This is actually amazing to me seeing their NOI's and D/E. Not sure what Moody's is looking at or if they are just very, very slow to make adjustments based on ACAS's current business.
I think the issue is all the related debt of ACAS's portfolio companies. If you include all debt - corp. + owned equities then the debt ratio's are much larger....The CEO has discussed this in the past...
All that being said, the huge amount of corp. debt that has been retired over the past few years should earn ACAS better ratings IMHO....
Good post. I feel it is only a matter of time before management makes the necessary changes to deal with the large discount to book value. It may involve a reorganization and/or a shift of their investment policy to produce more income at the expense of potential capital gains by modifying their investment mix. I don't think they will allow the discount to remain at this level indefinitely given the large shareholdings of key execs and board members. I also think they will continue to buy back shares until they eventually hit their regulatory maximum because it is less risky and easier to increase book value per share through buybacks than loans to third parties.
NMB... This man doesn't miss a THING! Here's what I'd sent on Wednesday evening:
"It would be interesting to hear your thoughts on this recent SEC Filing. I cannot connect the dot between this announcement and the restructuring we’ve hoped for… if there are dots to be connected."