Still no insider buying-I can understand before 10K and cash flow testing made public. Now that information is public and therefore should open up black out period. Maybe something else big happening behind the scenes to extend the blackout period.
I would agree possibly something else going on-they should be past the earnings blackout period. There might also be something disclosed in the 10-K that prevents insiders from buying. Looks like the 10-K was filed on March 2nd last year.
I would also agree that they would(should) preannounce earnings if there were large LTC reserve charges. Taking this to the next logical assumption-no news is good news.
There is a make whole call on that bond issue. This means that if you call the bonds early you basically have to make the bondholders "whole" and pay a premium to par such that they would be reimbursed for the 8.625% lost for the time period of early redemption. The bonds were trading on December 4 at about 104 because of this above market yield.
Higher interest rates should result in two opposing forces. Higher interest income on NEW money to invest offset by lower valuations on the existing fixed income portfolio. It seems to me that fixed income pricing has already factored in the first rate hike...maybe even a second one.
Could it be we rallied yesterday on the hope for some 13-F activity and we are selling off today because it didn't materialize.
I hear ya...its called negative convexity isn't it ? I wonder however if this time its different for a different reason. As housing prices have increased less borrowers are underwater which should stimulate sales activity which would tend to increase CPR. ANH might actually welcome this CPR increase with the recent increase in spreads. OTOH someone who was underwater may have a mortgage rate that is already greater than 5%.
I hear ya on the 15% discount to book-I also bought some on the 10th. Pulled the trigger a little to early obviously. My concern is do we have to look at these in place hedges as a reduction in future book value if prepayments cannot be reinvested with sufficient spread.
You have discussed tax rules but not the specific taxability of the ORI dividend. When a company has distributed all of its "earnings and profits"(a tax accounting term that is similar to retained earnings) any further dividends are considered Nondividend Distributions (aka return of capital). I checked with Charles Schwab and the ORI dividend in 2011 was considered qualified. What I am trying to figure out is when will ORI run out of earnings and profits such that the dividend will be considered a return of capital. If and when that happens you don't report the dividend as current income and instead you reduce your cost basis and report a larger gain(hopefully) when the stock is sold.
Does anyone know the tax status of their ORI dividends. I see the consolidated statements showing a loss which would lead me to believe that they would be characterized as return of capital(Nondividend Distributions) on a 1099. On the other hand from the 10K parent only statements it shows a considerable amount of retained earnings which would lead me to believe that they are Qualified Dividends. Has anyone out there owned this stock in 2011 and could check to see if their dividends were classed as a Qualified Dividend or as a Nondividend distribution on their 2011 1099.
Agreed...man its nice to have an intelligent discussion with somebody on these boards. I look forward to 1st qtr conference call to see how much these guys will "batten down the hatches". Any Capex that doesn't generate cash flow 3.5 times its cost and present value 1.5 times its cost at $2 gas will only put further stress on these covenant requirements.
Thanks for the info. I went to the 8-K filed 10-11-11 which has details of the bank credit agreement. Section 2.20 indicates the inital present value is equal to 4.552 Bln. Section 6.09 of the agreement states that the present value to funded indebtedness ratio should not be less than 1.5 to 1. The debt at 9/30/11 was approximately 1.8 Bln making the ratio approximately 2.5. The bigger question is what was the price of natural gas used to determine that present value of 4.552 Bln. There is room here but probably not as much as you would think.
Section 6.09 also has a consolidated leverage ratio requirement to be less than 3.5 to 1.
The Senior Notes also a leverage ratio requirement but I don't know what it is. I am trying to find out if there is a public filing similar to the bank agreement filing covering the specific details.
Taking the 2011 production of 236,832,000 MCF with $1.00 cash margin and using $70 Mil in interest expense you get a ratio of 3.38 times.
Again I'm trying to point out that this thing is tighter than you realize if these $2 prices persist.
If prices stay low and things get tight and they can get out of the bank debt then they only have to to be concerned with the Senior Notes covenants.
I am still doing some DD on UPL. If you go to the 10-K report you will find that there are present value and consolidated leverage ratio covenants on the bank line. They also mention a consolidated debt ratio covenant for the Senior Notes.
With little hedges in place for 2013 and no rebound in sight for natural gas prices I am concerned about UPL's ability to comply with these benchmarks in 2013. I don't see them cash flowing to the point where they are out of the bank line by yearend 2012.
If the haircut on repos is increased does it only apply to new repo contracts or does it filter into all existing unmatured repo contracts? In other words does the haircut PERCENTAGE survive the life of the contract or can it be changed before maturity? I realize if the value of the collateral declines a margin call can happen and therefore more collateral must be pledged.
In this environment there appears to be two different risks...the first being a change in haircuts; the second being the change in value of the MBS securities.
"if the total (prepayment hit) for 2010 were only 14 cents, and with 4 cents left undistributed from Q4, why would NLY cut the dividend 10 cents? it would only make sense if they were already having difficulty making the existing dividend (and the additional 2.5 cent hit/quarter was a bridge-too-far."
I know its possible to have a carryover from 2009 that can be paid in 2010 before the 2009 tax return is filed. My question to you is where did you get the undistributed 4 cent number...inquiring minds want to know. Knowledge is power!
"this however would make their raising of the dividend last quarter to $.27 from $.25 a very questionable decision."
Remember that 4th quarter dividend is a tax trueup for the 2009 tax year...not necessarily a statement of an ongoing payout.
Thanks for these numbers. Can I get these numbers somewhere? I presume the average life is lower than 100 divided by the CPR because of monthly principal amortization. I also want to be able to look up MBS market prices and swap rates to learn. Thanks again.