Just listened to the webcast from this presentation. It's well done and reassuring as to the company's management, results, and opportunities. Anyone in this stock should give a listen -- http://www.veracast.com/webcasts/bas/38th-annual-2008/id89106128.cfm
KFN has tiny exposure to residential mortgages ($315 million out of a total portfolio of over $8 billion) and has already marked those mortgages down substantially - 19 times the actual losses incurred)
Their debt is ALL long term now so they are not in position of ever having to sell assets at fire-sale prices to meet debt obligations. The projected earnings rate of the existing portfolio with NO further investments and no further capital raises is sufficient to cover the dividend, indefinitely.
The vast majority of all their investments are in high quality, S&P 500-type companies and thus far into the downturn are performing quite well.
Net book value of the company is $1.9 billion so the current market cap of $1.2 billion is a 37% discount to book.
They have management expertise and client flow from KKR, and the insiders have a large amount of stock personally.
To me this all adds up as a very nice picture and I am comfortable holding the stock with a +19% yield that seems pretty safe to me. Wish I had more funds available and I would be buying more at this level. When the smoke finally clears the survivors (I believe KFN will definitely be one) will emerge stronger than before.
I enjoy monster truck shows and I have forgotten more knowledge about finance than you will ever know. Sorry if I hit a nerve you nit-wit but please feel free to short this stock as much as you would like.
Level 2 - The answer is Yes. It is clearly explained in FAS 157 which establishes the Three Level Hierarchy. I don't have time to explain this to you.
Levered 3 times - I am well aware of the implications and the fact of the matter, for this company, that is conservative.
Excuse me Mr. Greenspan but if I was watching those television stations you proposed I would be under the impression that we have been in a recession for the past nine months. So I don't think we are "heading". Also, "record corporate earnings" please tell that to BofA, Citigroup, AIG, Microsoft, Apple, IBM ... Don't think so numnuts. Bulk of Corporate Debt is FIRST LIEN - Read the Q and please post facts.
There is no injury I have spelled what I wanted to spell you MORON!
I don't know why you would insult people who live in a trailer or are from Kansas and infer that people from Kansas live in double-wides. Kansas is a great state and its people are some of the best in the country.
Please don't try to read an article in businessweek and then think you are "knowledgable". You are a stupid little insecure person who spouts nonsense.
I don't need you luck believe me. Good luck investing the upto $10K you have in your discount brokerage account. Obviously you bought KFN on Margin at $9 and you are SORE From the losses. As my bookie once told me "don't bet more than you could pay".
Sorry for your losses but at least you could write it off against next years income. Although that will require you to move from the 1040EX to the regular 1040. So after you read the instruction book you could start giving out tax advice.
You clearly have learned little about investing or finance from serving Slushees at 7-11. I suggest you put the TV at the store on Bloomberg or CNBC instead of watching yet another Monster Truck show.
The vast majority of the assets are priced using level 2 methodology. Do you know what that means?
The company is levered three times. Do you understand the implications of that?
The interest coverage is barely 2.0x during a period of record corporate earnings, and we are headed for a severe recession. The bulk of the debt is non-recourse. Are you comfortable with that?
To add insult to injury, you don't know how to spell octogenarian or Manitoba.
I suggest you be more careful with your Kansas Regional Bank credit card- if you lose money on your "investment" they will repossess your 2002 Skyline Double Wide.
Good luck anyway. You will certainly need it.
DJS - u to seem to be full of $hit.
Of their Corporate Debt Securities 93% are First Lien Position - The Company lists the companies and industries for which it holds the loans and provides a loss stress and run rate stress analysis for the 2nd quarter.
There are no losses to be recorded.
Don't spew nonsesne please.
I've put my money where my mouth is - added 30,000 additional shares over the past two days.
Can't wait for earnings and dividend announcement.
OK, finished going through the 10Q. The bulk of their investments are high-yield (junk) bonds and distressed securities. I would not describe them as investments in "S&P 500-type companies". They may in fact be obligations of S&P 500 companies, but to be classified as high-yield or distressed, they are necessarily risky. I think the historically "normal" default rate for junk bonds is around 7%. In times like these, I would not be surprised if the rate reached, or exceeded, 10%. Therefore, as of this minute, the stock may be fairly priced. Spreads were at historic lows these last few years, which means KFN, like other high-yield investors, took on a lot of risk for relatively low returns. They are now paying the price for that. I will hold my position, but not add to it at these levels, despite the yield on the stock. With this amount of leverage (even though it is low by today's standards), a relatively small default rate could wipe out earnings. GLTA
Don't you see whats happening here. This is getitng crushed cuz the portfolio is basically all corporate debt and loans which in a bad economy fail, not to mention the majority are B rated.
Remember, management owns 15% of company some of which was open market purchases. See the following:
So a buy back would benefit them as well. However, companies always say in the conference calls " We talk about it all the time" Except for ACAS, they never do it!!
KFN is not collecting management fees on the $500 million they raised for the last two equity capital deals. $5/sh x 150mm shares = $750mm market cap - $500mm= $250mm base for management fees. That's such a relatively small base, so perhaps they may consider a buyback/ repurchase.
It's a good math problem but not one the executives at KFN are likely to contemplate. KFN from what I understand--correct me if I'm wrong--is externally managed and charges a management fee that is a percentage of assets plus profits. Managers with this set up and this includes many BDCs never want to do share buybacks because it reduces their management fees. Even though buybacks are good for shareholders, management companies care less about shareholders than themselves. Even internally run BDCs that don't charge a management fee seem to hate buybacks. I think these Wall Street investment banking suits have a constant "growth" mentality and rarely think on the order of deep value investors. They either want to just grow the business--not so bad in the right bull market circumstances--or grow their management fees--always bad in any circumstance. KFN is a cheap stock and that is one reason it is interesting to me. But otherwise it is not all that well run as far as I can tell.
One difference is that thes loans are much more liquid and they have no short term financing. BDCs like ACAS and ALD have very illiquid loans and more difficult financing. For example, ALD needed to use a great deal of it's free cash to cover a loan guarantee on CIENNA which the old BLX. They have limited availability left. While they may have less leverage, their financing is not nearly as good, nor is the credit quality of their loans IMHO. A KFN with less leverage would be even better. By the way, here's a great math problem for ya: Buy back 10 million shares at $5 for $50myn. Assume book is $10. This added a net $50 million to book immediately. That equates to roughly $.36 per share. Almost a quarter of dividends right there, plus the 7% reduction in share count brings income up to about $1.80, using the excess income to pay down debt. What do ya think?