One other note - if you look at the 10-Qs in sequence, you can see the collateral value and defaulted collateral value are steadily falling - presumably at some point that indicates the senior debt holders have been paid out - just not entirely clear when that is -
I think we can figure out some things from the language in the 10-Q, "Taberna VIII—Taberna VIII has $484.0 million of total collateral at par value, of which $49.3 million is defaulted. The current OC test is failing at 80.9% with an OC trigger of 103.5%. We currently own $40.0 million of the securities that were originally rated investment grade and $93.0 million of the non-investment grade securities issued by this securitization. We do not expect to receive any distributions from this securitization other than our senior management fees for the foreseeable future. "
This is how I interpret the above - just my reading, so maybe I'm missing something
Total collateral: $484 million
Defaulted Collateral: $49 million
Performing collateral: $435 million
RAS participation: $133 million
Theoretic current value to RAS if no more collateral defaults: ($133 - $49) = $84 million
Even if there are some additional defaults, there is a positive offset as interest accrues. So for example, if underlying collateral is defaulting at roughly a 5% annual rate, and that is the approximate yield on the collateral, it should be close to a wash. If the default rate is lower than the yield, RAS' expectation of eventual cash realization will increase.
One thing which is a little unclear though is the implication of the OC Test coming in at 80%. I am assuming the test is a ratio of performing collateral ($435 million) to total liabilities, including those due to RAS. 80% coverage on $435 performing collateral implies $544 mil total outstanding, which would imply a much smaller residual for RAS.
A balance sheet (with par values as opposed to market) would clarify this.
not sure you can extrapolate higher delinquincies from the higher allowance expense - it may be that they were over-reserved before and now they are on a more of a normalized run rate - note that non-accrual loans continue to fall on absolute basis and as percent of total loans.
actually, I think as others mention here, the quarter was ok - my sense is the stock reaction is to the commentary that spreads have narrowed on conduit loans - that's a constraint on growth, and if it lasts a long time on overall profitability, as maturing loans get re-booked at lower spreads -
someone asked about the 'writedown' leading to the GAAP loss - I believe this is actually a 'write-up' of liabilities, meaning expectation of collection has increased (RAS reports Taberna liabilities at market, not book) -
my end of day take is valuation may have gotten a little stretched relative to RAS' view of BV/share, and this prob. is reality setting in - they will provide 2014 guidance soon and that will probably be equally important in share price direction -
all things equal, I'm inclined to like IRT a bit more at this point - I think the owned business is fundamentally a better business, although structurally would prefer to own the manager (RAS)
I went back and ran these numbers - if you think the stock is fairly valued around 7 (or cheap I guess), they are essentially receiving $5 mil net of stock value, but will have to repay 12.6 mil in three years, inclusive of the 8% div accrual - that's a 36% rate of compounding. Not sure where you get 12-13%.
Hey, glad to see the old gang's here!
I haven't tried to calculate the 12-13% number (how do you calculate that out of curiosity...seems low, if you think there is value to the equity) - anyway, the one caveat which you aren't mentioning is that the lender acquired the bulk of the debt at a discount (which I don't think has been publicly quantified) - so they may be thinking of it as a penny on the dollar speculation at this point, where they make a profit even on a partial recovery of debt -
I assume you get the $25 mil from the initial contract w SMWD - if you look at the language at the time that deal was announced, it was presented as a discounted rate because SMWD was going to be the lead customer with some associated costs. My guess is they would try to price additional deals closer to $750/acre foot, still below their original projection of a few years ago.
I take it you're considering a short here? I closed out mine awhile back when momentum seemed to be shifting up again - and I wouldn't be surprised to see a bounce if they conclude all the lawsuits successfully this year - that would leave the Federal right of way issue (does CDZI qualify for an exemption to Federal environmental review due to its use of railway tracks), and what is likely the more difficult hurdle of whether MWD will allow access without the implementation of a very expensive filtering system for Chromium 6 contaminants.
I was interested to see the debt sale with equity kicker - would be VERY curious to know what was presumably a vulture debt buyer paid for that debt - if its penny's on the dollar, it's another indication there isn't much here - if they actually paid substantive dollars, then maybe they see something - either some residual value, or a plausible chance project is approved with manageable economics. The recent drought clearly helps these guys, although my sense is that is more in the Northern part of the state (haven't spent much time looking into this)
mgt has been pretty clear that unless we have significant credit deterioration in from here in the Taberna book, the Tabernas will begin to return capital in the 2017-2019 time frame. That's a long time to wait, but they have value. That's why they still represent a substantial portion of GAAP equity for RAS.
In several cases in recent qtrs. when RAS has reported mark to market losses, that is because the value of the Taberna debt is increasing - in other words, the market is perceiving the underlying credit quality of Taberna is improving (in addition to risk spreads narrowing).
Also, you might think about taking a slightly more civil tone in your posts.
The prior comment which incorporates the short term mkt on the cost of equity raise is looking at wrong metric. The key point is cost of equity capital, which is distributable cash flow yield plus the natural rate of growth of that yield (pre reinvestment). My sense is this is currently low double digit, ESP. After taking into account the eventual cash flowing of Taberna. Not clear to me RAS can do better than this on risk adj. basis. Yes, year one returns are accretive - the issue is what will be long term loss rate, as this detracts from return. RAS fails to address in presentations.
All by way of saying still long, but would prefer company lay off issuance. Limit the dividend if there are reinvest opportunities - more tax efficient. Mgt here cont. to strike me as sub par unfortunately.
Recognize these are very diff. portfolios, but what's IRT valued at now on a distributable cash basis?
Smith actually has a pretty long track record of operating businesses with the intent of creating shareholder value. There is absolutely nothing in a fairly long history running public companies to suggest he would effect a take-under.
I don't think that's true for Kellogg. My general impression is his interest is in creating value for Peter Kellogg. Don't think there's any evidence he cares much about other shareholders. Maybe he's an altruistic guy - but I wouldn't bet on that. Actually I think most of the available evidence suggests a fair amount of playing loose with filing rules, and liberal interpretation of shareholder preference (65%+ shareholder in favor...)
Smith has been slow to broaden the senior management team, and he's acknowledged as much on recent conference calls. That's the potential positive to come out of all this. If Kellogg gets board control, I think there may be potential negatives.
Why would anyone bother paying you a premium for your shares when they already have effective control? That's why transactions like this almost never happen. You confuse the percentage of shares owned with what actually constitutes control.
Given the percent of earning here linked to iron ore, stock has done comparatively well (vs CLF, VALE, etc). Compton was smart acquisition.
If Kellogg wants control should pay for it. Give me other examples where control has been granted for free.
You have no idea if Kellogg board would be an improvement. Doesn't appear theyve done a stellar job with IAT.
33% plus board control = ownership. Don't give away the company. Even Ichan, one of the cheapest guys in the world, pays a control premium when he takes full board control. Getting full control without paying a premium is unheard of, and completely unacceptable. Mgt has extended the board seat olive leaf, gotta vote w management here - if you don't you are just giving away the control premium.