Back of the envelope it looks like $1/shr is reasonable going forward. They have about $.36/shr in accretion to book for the next (conservative) 3 years and interest is about .62/shr on loans/debt not financed and maybe a few cents for that cash/funded loans....i'd expect that cash to go to work but lets keep that out...so $1/shr seems reasonable....I noticed that a lot of the loans are IOs and a fair amount mature in '12/'13 some of which carry a fair amount below cost...hopefully that is just where we have them marked now vs some default probability...but it makes one wonder is 10% yield the right number given risky portfolio (and we are in the sub/mezz position)? any thoughts?
after further review, $1/shr dividend looks to be on the high side...reading thru their release, they have only 38.6 mn of accretable discount and depending on amortization period, it can alter divvy quite a bit...they have a lot of discounts coming due this year but hard to say how much of that is accretable...i went through their portfolio and they'll probably earn 58.2mn w/o accretion then, assuming that 38.6 is over two years (maybe its one, maybe its three?), we have 84 mn vs 19mn in costs (1.5% x SE ~= 15mn goes to FIDAC! nice deal!) means about 65 mn in income or 84c/shr or 8.25% divvy yield....could vary from .68 to $1 /shr....we better lever up to reduce that %pay-out to FIDAC......
When they bought the Barclays assets they stated that almost all were due by end of 2012. Ergo most of the $38.6 falls into this year. That means they have $1 to distribute, so we should be seeing $.25 quarterly dividends.
They will use the cash for something presumably, so that may pay a few more pennies.
Great analysis. Also consider that BV over $12 is supported by refusal to recognize any write off for $63MM of loans in default. Mgmt says market value is above book, no need to reserve. But one has to wonder. The longer they don't resolve this issue, the more it becomes evident that they cannot get $63MM from the collateral.