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RAIT Financial Trust Message Board

  • ruswise ruswise Feb 15, 2013 6:19 AM Flag

    Rima owns 6,703,287 shares now

    wow, they doubled their holdings from last quarter?

    is this right?

    13D filed yesterday

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    • It does appear that RAS has expanded its position in RAS, but 13G's can be confusing. RIMA owned 3,475,664 share of RAS as of December 31. They also owned convertible notes that were worth $23.5 Million and which were convertible into roughly 3.2 Million shares. They had roughly the same positions in RAS on September 30, when their ownership of convertible bonds was up almost $9 Million from June 30.

      This is where 13G's can be confusing. The combination of RIMA's share stake and its convertible notes position give it a potential stake of roughly $6.6 Million share, and it is that combination (real and prospective) that has to be reported on the 13G. It doesn't mean that RIMA has converted a single note to shares. By the same token, 6.7M shares may be 100,000 shares more than RIMA's December 31 report of shares and note holdings would suggest, so it would appear that RIMA has expanded its position somewhat since December 31. There are several ways in which they might have done that. One would be to do dividend reinvestment, which would have added over 50K shares all by itself. Another would be to buy more convertible bonds. That's always possible as well. And RIMA does have room to buy shares given the December share offering (which RIMA probably did not participate in).

      The most likely thing is that they are doing dividend reinvestment.

      For what its worth, we aren't terribly far from prices at which RIMA would have an incentive to convert to common stock. The conversion price is somewhere between $7.30 and $7.60 (I won't even guess where it is in that range, as it depends on a complex algorithm) and RAS closed at $7.29 today. That won't fully determine things, however. The real decider will be yield-based, and RAS breaks even with the convertible note on yield at about a 13.5 cent dividend. Since, moreover, RIMA acquired many of its convertible bonds at discount, the yield crossover for more than half of its bonds is even higher than that (closer to 18 cents per share).

      So bottom line, RIMA probably will start doing conversions, but not until the dividend goes over 13.5 cents a share later this year. To the extent that RAS bylaws restrict those conversions, moreover, RIMA will probably bide its time and, if it decides to sell anything, will sell its bonds for above face value (probably well above face value).

      Hope that helps.

    • They might have converted some debt to shares. Don't assume open market buys. By the way, a filing from RIMA yesterday shows that they are very long DRL and I think they are probably playing the distressed DRL preferred issues as well.

      I'm no longer in RAS or the RAS preferred, but am currently long DRL at 17% of book value and the preferred issues which are trading at a fraction of par value.

 
RAS
8.12+0.01(+0.12%)Jul 11 4:03 PMEDT

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