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Anthracite Capital, Inc. Message Board

  • Nerd86 Nerd86 Aug 18, 2009 10:10 AM Flag

    This was good news

    The conversion of debt to equity is usually a wash, but in our case we are receiving 5.5 to one in value. In other words we are buying bad debt at less than .20 on the dollar. The other factor to consider is that we just saved 2.1 million per year in interest expense. With each conversion AHR become3s stronger and as values increase, if they do increase, the potential dividends will increase to the shareholder, even though there are more shares. Even the potential buy out becomes more attractive as noteholders generally work hard to capture the bulk of the money at the expense of the shareholder.

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    • Nerd -

      Vap and others keep wondering "why?" would someone convert at $3 a share.

      It may be that they know a serious BLK action is coming butout at $3+ per share... if they agree to convert.

      I've mentioned that they need "serious" exchanges, as the first 2 or 3 totalled about $10M. These 2 total $18M. Recall that this is 1/2 the GC issue and the action today is about 40% of that part.

      Mentioning de-reiting in the amended 10Q sets the table for the action. This action allows BLK to buyout a company with $400M accumulated loss and ergo $160M is tax-benefit. They don't want 11.75% debt outstanding - that would be the benefit of a buyout - BLK can get money for half that... with lower cost of capital, this is a no-brainer for BLK.

      Step 1 - De-reit - I posted that for the last couple of weeks.
      Step 2 - Buyout, or maybe just buying enought to be able to consider as a subsidiary - i.e. more that 50%. Perhaps they offer shares to be turned in for $3 to them?

      I think they are sick of the manipulation of their own stock. I would be.

    • I agree. Good news.

      Meanwhile, AHR is down and the following companies are up.

      BLK, GKK, MPG, RAS, FRE, FNM

      Today is a buying opportunity.

    • right now, I assure you, it's about maintaining liquidity (survival) not about getting something for nothing. The noteholders would not be converting if they thought they could get face value for their notes, they are converting because if they don't, AHR will not be able to "continue as a going concern". Just keeping it real here. Let's not get too exhuberant yet.

      • 1 Reply to jordanriver88
      • But, the bondholders would be paid b4 common (and preferred).

        They're sitting pretty with 11.75 and higher rank.

        Why $3? Why accept that?

        Either:
        1) Cozy insider scooped up the bonds and did AHR a favor
        2) $3 is a good deal... and the presentation to the bondholders impressed them as such.

        (PS they do get a conversion fee, on top of the $3, so their cost is very good)

 

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