IndyMac Bancorp (IMB) Deferral Impact on Alesco Financial Inc.
PHILADELPHIA, May 12 /PRNewswire-FirstCall/ — Alesco Financial Inc.
(NYSE: AFN), a specialty finance real estate investment trust, announced
today that IndyMac Bancorp (NYSE: IMB) disclosed this morning that it will
defer making the interest payments on IMB’s trust preferred securities,
including those in AFN’s portfolio.
AFN holds a portion of the equity interests in eight collateralized
debt obligation, or “CDO,” transactions which include trust preferred
securities issued by IMB. As previously disclosed, IMB’s securities
represent an aggregate of 2.43% of the total pool of collateral in those
eight CDOs. This collateral represents approximately
.1 million in
aggregate interest payments per quarter to the eight CDOs, of which AFN’s
proportionate share is approximately $1.5 million or about $0.02 per
diluted AFN common share per quarter.
AFN is in the process of reviewing the impact of the IMB deferral on
its portfolio. AFN currently expects that IMB’s deferral will trigger the
over-collateralization tests in five of the eight CDOs for a period of
time. Once an over-collateralization test is triggered in a CDO, AFN will
no longer receive current distributions of cash in respect of its equity
interests in the CDO until sufficient cash flow is paid to senior debt
holders in the CDOs to cure the over-collateralization tests. IMB did not
disclose how long it expects to defer its payments. AFN currently expects
that, even if IMB does not resume making payment, and assuming no
additional deferrals, the five affected CDOs will recommence making equity
distributions within three to eight quarters. For the year ended December
31, 2007, and the quarter ended March 31, 2008, the five CDOs which AFN
expects to trigger over-collateralization tests contributed $30.1 million,
or 36%, and $8.2 million, or 41%, respectively, of AFN’s adjusted earnings
for such periods. AFN’s adjusted earnings will continue to include this
income even though AFN will not receive corresponding cash distributions
until the over-collateralization tests have been cured.
At April 30, 2008, AFN had available unrestricted cash of $120 million,
including cash generated by previously-disclosed gains on credit default
swaps. This cash would be sufficient to allow AFN to maintain its first
quarter 2008 dividend rate for the remainder of 2008, even after giving
effect to the trigger of the over-collateralization tests described above.
The payment of future dividends is, however, subject to the review and
approval of AFN’s board of directors, and there can be no assurance that
AFN’s board will determine to maintain the first quarter dividend rate. As
discussed on AFN’s earnings call last week, AFN is reviewing a number of
strategies for the company, including whether to continue to maintain its
REIT qualification. Any change in strategy could impact the level of future
dividend payments.
About Alesco Financial Inc.
Alesco Financial Inc. is a specialty finance REIT headquartered in
Philadelphia, Pennsylvania and trades on the New York Stock Exchange under
the symbol “AFN”. Alesco is externally managed by Cohen & Company
Management, LLC, a subsidiary of Cohen and Company, a global alternative
fixed-income asset manager. For more information, please visit
http://www.alescofinancial.com .
Investors: Media:
John Longino Joseph Kuo
Chief Financial Officer Kekst and Company
215-701-8952 212-521-4863
info@alescofinancial.com
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Source: Real Estate Newswire
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