if they showed recovery the banks would have tried to liquidate the collateral. at 2010 they probably put every bad news into the results in order to convince the banks that "extend and pretend" is their only hope of getting paid in full. that is how you get banks to work with you. every cent you show they will take (that is what they do for a living, that is not some personal opinion, just an observasion).
Nothing except for a few small things like tax asset, 50% of a free option on a real estate recovery, the free option will pay your overhead for the next 3 years and than you have some cdo management fees and some out of money cdo equity.
I guess it is nothing. it is a lottery ticket with less risk.
We retain the CDOs that are not cash flowing to Corporate (I, II and IV). CDO III, the only one cash flowing, goes to legacy. I think there is value in the retained interests of those CDOs but it is going to take 3 to 4 years to see anything of it.
Now, if they are able to generate some cash and open other sources of financing and start buying the CDO notes at a discount like NCT, GKK, ABR ...
... on CNBC a couple weeks ago as it pertains to occupancy and rents. There is clearly a disconnect between perceptions (perceived fair value) and reality (direction of asset productivity) but...
... that was true of real estate assets all thru the credit market crash... mark-to-market activity pushed writeoffs hugely in excess of what assets were generally producing VS those that had become unproductive.
It's part of why I own CT right now. I believe many mark-to-market writedowns that have occured will, in turn, become mark-to-market write-ups as ensuing productive reality converges with perceptions in the market.
I think that's what the other, new legacy owners believe as well and I believe that's why CT was allowed to come out as clean as it did... the other players are looking ahead to what they now have an interest in. Intelligent perceptions of what the future likely holds played a big part in this deal looking better for all players than current market perceptions would suggest.
I was able to extract this piecemeal of information related to the 4Q and I took it as a good sign:
"As of December 31, 2010, there were significant differences between the estimated fair value and the book value of some of the Securities in our portfolio. We believe these differences to be related to the current market dislocation and a general negative bias against structured financial products and not reflective of a change in cash flow expectations from these securities. Accordingly, WE HAVE NOT RECORDED ANY ADDITIONAL OTHER-THAN-TEMPORARY IMPAIRMENTS AGAINST SUCH SECURITIES."
For better or worse you are right. I believe this is a skeleton for future rebuilding, but I just hope they do not go the easy way (issuing more stocks at low price).
not too many reits are getting a clean slate with legacy paying the overhead plus a nice bonus to management for liquidating in a positive way the legacy.
since someone sees value in legacy (banks got some equity and someone was willing to put $83M in 15% and be bellow the
lenders) I would love to see how it unfolds over time.
overall it is a fair (yet complex) deal.
management kept us out of the dilltion game (so far) which is a good sign.
keep your fingers crossed and hope for the best. if real estate starts creeping up the cdo's equities alone could be worth quite a bit to ct. I thought they also had some junior intrest in the cdo's and I am not sure if that is also now part of legacy.
I mean, why should the shares be worth anything at all then? Oh wait, they shouldn't be. Clearly sleeping on it and re-reading the deal hasn't changed my view of it. It's terrible for the common shareholders of CT.
Do you actually think that is going to happen? I sure don't. Give me a scenario where this actually comes to fruition. Basically now this is like paying $2.30 for a cardboard box with nothing in it.