As far as I know, they did issue bonds backed by mortgages so yes, the interest and principal do go to those bondholders to the extent they are due and AHHAP keeps the excess. The bonds are "over collateralized" when issued (who knows what that current status is) as far as principal is concerned and the interest rate on the mortgages is higher than that due on the bonds. The spread on both is where any profit comes in and how they can pay the dividend. What we don't know is whether that has now turned into a shortfall. Because of the timing, I feel it is more likely that they are looking at additional investment into the "toxic" assets rather than letting the REIT shrink to nothing over time. If it was the former and no hope of ever receiving future dividends, I doubt they would have even bothered to mention the cumulative feature of the dividend. Hell, they didn't give any other useful info so why bother to mention that?
Does anyone know the name of any of the bond series that were issued and where we can find out if those payments are current to those holders?
Yeah it's like a nightmare for me as well. I thought Thornburg could have made it, but with a 500 million deficiency claim, it's RIP Thornburg.
The only ones that are making it are the "too big to fail" companies where the government has no issues to throw away taxpayers' money. AIG, Citi, GE, etc.
Incidentally, if we compare the performance of subprime loans originated by "big boys" versus the "core" subprime lenders such as New Century, Accredited, and especially Delta Financial (the best subprime lender btw, even today its loans are doing around 5 better than the average), we notice that big boys' loans perform much worse.
The fact that a disproportionate share of money goes to companies such as AIG and C is bad enough, but the fact that senior financial companies employees are still getting excessive bonuses adds insult to injury. I'd like to see whether the politicians bite or stop short at barking with their bill regarding bonuses. Something tells me it's the latter, and that while some execs will return the bonuses (and indeed, some have already), others will keep them.
Some of you guys might remember that last year, I posted that Paulson's plans actually made some sense at least. Well lo and behold, govt changed the terms down the road (for example, converting secured loan in AIG to pref stock) which nixed the very reasons underpinning my endorsement (to a certain extent) of what Paulson did.
Now with Geithner's private-public partnerships, my gut feeling is telling me that he might hire the "smart boys" from GS, C, BAC, and maybe even AIG to manage the assets. A much better choice would have been to hire managers of small local banks who perform well notwithstanding the crisis.
I understand there's lobbying and cronyism going on, but damn...we're going to have a second great depression / lost decade in a best case scenario - so maybe it's time to start thinking about America first, and the "smart boys" after? Thornburg is the second-best originator in the US as per Larry Goldstone's words, if no one wants to invest money into this company then it's a symptom of a much wider illness.
Well, I guess Novastar, Doral, Fremont, now Accredited. Not surprised, but adding more deferred divvys to the REIT liabilities could be just another creditor class for the BK filing, unfortunately.
Where the buyers come from?? Probably people like us who have shares at a higher price and hope we will eventually be rewarded. I know I transferred 2K into both of my boys education accounts and put a buy on about 700 shares each at a limit of $3.02 and $2.75. As of a few minutes ago they had not been filled. I was able to put the orders in without calling my broker which surprised me because the last few orders I placed I had to call in to do it.
Accredited offered no info in the press release as to why the dividend has been suspended. As a general rule, a dividend suspension should be seen as a negative.
It is possible, though perhaps optimistic, that the dividend suspension is to preserve capital in the near-term since there is an upsurge in re-financing and the more capital Accredited has, the more profit potential.
Unfortunately, no news (good or bad) was provided, so the uncertainty will send the price down. I won't be buying or selling.
It is quite likely that they are suspending the dividend so they can use whatever cash flow they have to invest in the new "toxic asset" program. They should be one of the entities that meet the requirements to participate directly in the program based on its size and management of mortgage backed securities. If so, this (the toxic asset program) should be a rather profitable investment over the long term and finally earn Lonestar a return on its investment in LEND/this REIT. Considering the credit markets today, keeping all of the cash flow from their mortgages that are being paid is probably AHHAPs only source of cash for investing in this anticipated "bargain." Even if they could obtain credit as well, I'm sure they are seeing this as the buying opportunity of a lifetime and want to be able to purchase as much as possible. Of course, I am sure they haven't made a final decision as all of the details of the program and pricing aren't available yet, but they need to have the cash ready if it turns out to be the good deal most professionals think it will be. Management is probably not bothering to explain this because they can buy back the stock on the cheap and make even more money if people panic and sell AHHAP without thinking.