Check out the BDC MCGC, the damn thing beat the ratio and management says they are 7 points above the 2.0 threshold currently, and it's improving! Their covenants are set at 1.8. ACAS just reported a 1.6 ratio.
This is huge, it means MCGC will almost certainly live unless the world comes apart, whereas the best case for ACAS may be to seek relief in Chapter 11, unless that threat moves the creditors. But the darn thing didn't go up a buck like it should have, the market apparently doesn't understand what this means. It's only around 70-75 cents right now, that's insane, imo.
Also, you gotta look at RAS and the preferreds. Just to summarize, the market hated the call, sure, and there's no visibility on dividends, but . . . $14 NAV, no liquidity issues, preferred dividend coverage probably in the 7-8 times range. 55 cents for the common, $3.50 for the preferred. You should be arrested for getting it that cheap.
Why do you keep saying that RAS has not liquidity issues? They need $53M to pay off their credit line by next year - that's why there is no common div. The market clearly expects RAS to cancel the pfd as well, to retain cash.
They have $28M free cash in the bank, will flow somewhere north of $100M from operations, and only have $33M to pay off this year. Preferred dividends are only $14M. That leaves them with at least $80M of liquidity to play with in 2009.
That assumes ZERO repayments on the asset side. Scheduled maturities in the commercial loans are $619M in 2009 and $523M in 2010, some of which are committed to offsetting debt of course, and unfortunately it's not possible to tease that number out of the 10K (at least I couldn't). Of course, a lot of those repayments won't happen, due to the lack of outside credit. Which means RAS will probably extend, but they'll extract blood to do so in fees and rates.
That help? Also note that Schaeffer did NOT say they weren't paying a cash common dividend this year. Whether they will use the Rev. Proc. or not is anyone's guess, he wouldn't commit, and said it would be a quarter by quarter call.
"..$3.50 for the preferred.."?
Now the Ras pref A is 2.35!
The market is saying Ras is going to pass on the preferred dividend. If they don't pay any common dividend for the first three quarters of 2009, they don't have to pay preferred either.
The market doesn't now what it's saying, RAS common was as low as 45 cents! All the REIT's have been dumped these past few weeks, and there's been a buyers' strike.
If SFI pays their preferreds, RAS will. The operating income cash flow coverage for the preferred dividends this year will probably be in the 7-8 times range.
Repeat; despite the horrific price action, RAS is NOT undergoing any kind of liquidity issues which would hint at such action. They have NOT decided to forgo paying common dividends, they haven't disclosed any decision on that, deferring it to a quarter by quarter call, and, yes, they mentioned that awful Rev. Proc. Whether or not they will use it, pay cash, or strike a compromise, is anyone's guess at this point.
Oh, RAS by far!
- It's cheaper than MCGC right now.
- The NAV is $6 higher.
- It's a REIT, not a BDC, and doesn't care about meeting a ratio of assets to debt. MCGC is above the 2.0 ratio, but just barely, and has brand new covenants at 1.8, a relatively thin cushion.
- RAS funds flow is much higher, 33 cents vs. 19 cents in Q4. RAS cash flow will be reduced in 2009, it's already lost another couple of those damn Taberna junkers, but that was relatively minor, and its 2009 cash flow per share will be well above MCGC's.
- Both companies are basically in a forced de-leveraging mode, steering cash flow to reducing debt, which limits how much they can rollover into earnings or to repurchasing debt. But that limitation for RAS is before you measure cash flow, it happens inside the securitizations, whereas with MCGC it will affect the use of free cash flow. It's in a box to an extent, committed to reduce a large portion of its debt quickly, but a much more survivable box than before!
- There are no material liquidity issues in RAS, almost all the debt is nonrecourse and match funded against their security packages. There are some debts coming due, but nothing that can't be handled in the normal course. There are no margin calls left, no repurchase debt.
In fact, RAS's maturities coming up are less than NRF's, not that RAS has anything close to that kind of gold standard asset quality, the underwriting at NRF and RSO was pretty special.