William Powell has advanced no plan for the future and put forth hardly any effort to counter a crisis in confidence among the shareholders. Vince Lombardi, I believe, said "the best defense is a good offense". Here we have no offense and as far as a defense, the leadership didn't even bother to show up on the field.
"Mark to Market" for debt securities distorts the financial position of companies holding debt. Although you can not sell the mortgage for more than 30 cents tomorrow, so long as you your liquidity is OK, you do not need to sell it to recover 100%. All that is required is the debtor make the payments. CRZ has $1.1 Billion of Mortgages that are paying interest, minus whatever has defaulted in the last 3 months,and perhaps returning a portion of the principal. "Mark to market" makes it look like a loss. It is only on paper.
An example. CRZ was selling for $5.00 per share, today it is at $2.50. You must show a loss of $2.25 on your balance sheet, even though you will receive a 30 cent dividend and the company still is in existence. If they keep paying that dividend you will get your money back in 17 quarters. Is your CRZ stock worth 50% of its original value?
That is why their dividend is probably safe. They have twice as many mortgage assets earning money than is shown on their balance sheet. Until they sell them, that will continue to be the case. If you want to be conservative assume a default rate and then take a 50% loss of principal on that portion. At 20% still leaves $1 Billion in mortgages.
I realize it is hard to sit and watch a stock decline in value every week.
However, it appears management is sitting on substantial debt assets ($1.1 billion or so) that have been severely marked down because there is no market to sell them today. However, with debt instruments (unlike other assets that must be sold to realize your cash), so long as there is no default, you will collect the entire $1.1 Billion, regardless of what the market price is. It will just take the passage of time. Even if there are 10% defaults, what is the potential gain from where the securities are now valued to $990 Million?
In addition, they appear to own several commmercial office buildings in different locations that have positive cash flow.
It appears their "mortgage" division may be temporarily shut down, but the above should give them substantial income over the next few years.
The risk appears to be liquidity, which they are addressing by paying off short term debt,holding their maturing principal repayments not required for debt repayment, and lowering the dividend.
Since I am new to the board, I would appreciate some constructive feedback. Thanks.
So far there is NO business plan that has been made available to the public, (us). Perhaps there is some plan in the works, (it’s been months since the “no plan” announcement by management), but there is no way to know what this might be as of now. So there is a huge amount of uncertainty and ambiguity with only the hope that things “will get better”. Maybe this will happen and maybe not.
All that is known at this time are what the past dividends have been, while there is no KNOWN mechanism in place to support any dividend. Greed and hope is the driving force on the price of this stock at this time. It’s almost a case of, “It’s my big dividend, and I want it now!”
As to what may happen in the near future is all based upon hope and conjecture, or blind faith in management. To me this has become nothing more than a gamble, and not so much an investment.
Perhaps the gamblers are right and will come out ahead in the long run. Perhaps a day trade approach, for those so inclined, is best with a quick clip of momentum for a profit for the day. But for dam sure the fundamentals are just not there for a “value investment”.
Ghost, You seem to have a very good take on the situation here. If this is not a screaming buy for the individual investor, then it is one of the most eggregious rip offs of all times.
I think tomorrow's close will be much higher than today's close.
I am a short term trader... Am looking for a quick $1 profit. Anyways I am gambling with money I made on the market last 12 months, yeah, thats right, I increased my money by 1/3.
Maybe in terms of the management of CRZ, BAM may not stand for Brookfield Asset Management. It could however stand for Buffoons And Morons.
I am so glad I only have the small initial position that I took here and did not average down when the "bankruptcy article" hit.
When I think of management's lack of actions and shareholder communication, the picture of a deer in the headlights comes to mind. At some point they have to start to take some action to stem the blood flow here before the patient dies on the stock exchange floor from inattention. DISGUSTED WITH THE LACK OF PUBLIC COMMUNICATION
>>BAM may not stand for Brookfield Asset Management. It could however stand for Buffoons And Morons. <<
Notice how BAM had the debt from CRZ changed to secured from unsecured.
From the Q. "In August 2007, we entered into a 100.0 million unsecured 364-day credit facility with Brookfield US Corporation, an affiliate of our Manager. Indebtedness outstanding under the unsecured credit facility bore interest at LIBOR + 4.00%. In November 2007, we and Brookfield US Corporation amended the terms of the facility, effective as of September 30, 2007, to convert the facility to a secured revolving credit facility that provides for borrowings of up to $100.0 million in the aggregate and expires in May 2009. On March 7, 2008, we and Brookfield US Corporation amended the terms of the facility, effective as of December 31, 2007, to extend the term of the facility from November 2008 to May 2009, to revise the financial covenant relating to minimum net worth and to eliminate the financial covenants relating to minimum net income (as defined in the facility), a maximum leverage ratio and interest rate sensitivity. The secured facility bears interest at LIBOR + 2.50%. The credit facility and the amendments were approved by the independent members of our board of directors. As of March 31, 2008, we owed $48.2 million under this facility and we had $51.8 million of unused availability under this facility."
Management did send out a press release on the 7th july, the day the stock hit a new low, saying that they had the liquididy. What else do you want? A press release every week? Well I guess for me being a new commer into this stock I dont have all these bad fellings about managent as you guys that have lost tons of $.