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RAIT Financial Trust Message Board

  • dividendaristocrat dividendaristocrat Sep 25, 2008 7:38 PM Flag

    13% Interest rate reveals a mystic truth.

    That RAS is a subprime borrower.

    You don't pay 10% over treasuries, have a top up provision and give up equity for nothing.

    Note that this new debt is fully recourse to RAS.

    "RAIT and Taberna Realty Finance Trust, or Taberna, a subsidiary of RAIT, each guaranteed the obligations of TLHI and RAIT CRE to Cedric under the RAIT CRE Agreement and the TLHI Agreement, respectively. The guarantee of the TLHI Agreement, or the TLHI Guarantee, and the guarantee of the RAIT CRE Agreement, or the RAIT CRE Guarantee, each contain customary representations, warranties and agreements of RAIT and Taberna. "

    "a) Each Guarantor hereby, **unconditionally and irrevocably**, guarantees to the Agent, on behalf and for the benefit of the Secured Parties and their respective successors, indorsees, transferees and assigns, the **prompt and complete** payment and performance by the Seller when due (whether at the stated maturity, by acceleration or otherwise) of the Obligations."

    Looking into the agreement, it appears that RAS is financing its investments in RESI mortgages.

    It would be very interesting for someone to correlate the values of pledged assets vs RAS's cost basis as revealed in last SEC Filings.

    Also note that Angelo Gordon, does not pussy around when it comes to expected losses on resi mortgages.

    They get top up payments equal to the excess of (realised losses + 50% of par of 30day+ loans) over a permitted level of losses.

    And these repo lines also include an mechanism for margin adjustments as well...


    In addition RAS is probably very pressed for cash since the provisions of the " RAIT CRE" agreement require repurchase by May 29, 2009.

    So RAS is taking a 9 month loan at 13% rate with monthly amortisation. All this interest for a measly $3 million.

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    • "And how much worse it is when it was all too foreseeable..."

      hehehe i'm really on a roll now. replying to my own posts from last year. i told you all lemmings i am the master of these message boards. hopefully no one can find the posts of my screwups like lse and gnv. hehehe. btw did i tell you all that i've had some major flame outs the past year. those don't count. only the ones i got right count. all the ones i got wrong were really someone else impersonating me. the fact that this is one of the worst bear markets in history and almost anything invested in stocks last year is down today doesn't count either. see because i am legend and all you lemmings are not worthy of breathing the same air i breathe. just remember that my screwups don't count cause i am legend. hehehehe.

    • "In this business you can never be too careful."

      RAS wouldn't have gone for a reset. Or at least that would be surprising. The current option still allows for shorting with limited downside as you know, so I doubt that the business AG is doing isn't being done carefully. You think?

      All IMHO of course.

    • " Hmmmm, looks like Angelo Gordon's warrants are out of the money."

      Now very out of the money.

      IMHO they should have pressed for the warrants to have a reset, in case the price of RAS declined too sharply.

      In this business (distressed asset backed lending) you can never be too careful.

    • "I remain sure that I'll do fine over the long term. "

      "I'll take your misinformation on the bond apart elsewhere. "

      Davis, first you'll need to get your facts straight, then we can talk.

      What we are dealing with is not a bond, but a REMIX of residential CMBS, which is evidenced by a "Master Repurchase Agreement".

    • Your inability to see the relationship is a symptom of your Aspergers Syndrome.

      Enough said. I'll take your misinformation on the bond apart elsewhere.

      I remain sure that I'll do fine over the long term. Surely, your employer won't need my shares to cover, but if they do, I'll be happy to sell them for $40/share.

    • If the purchases of notes reported 2Q are accurate, they are selling for (or at least RAS is purchasing them for, less than 50% of face value.

      You don't need to look at the 2Q report to see that preferreds are selling at less than 40% of face value at the moment. If you look at the 1Q and 2Q report, however, you will find a real decline in the value of outstanding preferreds (and an additional mark to market discount). This suggests that RAS has quietly been repurchasing preferreds at a discount.

      Both suggest that paying 13% interest to allow continuing purchases of bonds and preferreds that save 20% is a good deal.

    • Div,

      Thanks for sharing your thoughts.


    • I think AG will do ok, since they have a repo line backed by specified assets.

      The other debt is backed by RAS's general credit, which is inturn supported by a few file folders worth of securitisation certificates + etc. There are no hard assets here.

      AG doesn't mind drama, since they have a repo agreement. If RAS goes BK (or they start a death spiral via causing a cross default), they will walk away with the pledged assets, and submit a claim against the estate for their inconvenience.

      I wouldn't buy the preferred shares, since if the common is toast, the preferred won't be doing a lick better. And you can probably infer my thoughts on the common.

      If you are going to buy the converts, check to see what the situation is wrt to adding on secured debt and senior liens.

      And always remember what Ben Graham said in 1932,

      "A low-grade bond or preferred stock constitutes a relatively unpopular form of commitment."

    • Div,

      What do you think of RAS debt?

      I think it's trading at 50% of face.

    • Davis, TL/DR. Next time be more focused.

      I'm not sure what some dead lawfirm has to do with the fact that RAS is forced to borrow from AG at 13% APR + warrants for 250,000 shares.

      If you want to escape RAS with only a moderate loss, you will need to come down from Cloud Cuckoo land, and realise that RAS is about to be strangled in the bathtub.

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