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Firms Manage Earnings, Liquidity

Firms Manage Earnings, LiquidityRecent earnings and corporate activity

February 7, 2008


Several financial firms continue to grapple with mortgage-related losses and liquidity.

Wachovia Corp., which saw its fourth quarter earnings fall by more than $2 billion from a year earlier, announced Wednesday that it has priced a $3.5 billion preferred stock offering that is expected to close tomorrow. Investors included around 80 major domestic fixed income investors.

Tom Wurtz, chief financial officer of the Charlotte, N.C.-based firm, noted the strong investor demand will provide Wachovia a strong Tier 1 capital ratio.

A $475.7 million impairment charge related to goodwill and intangible assets at LendingTree led to a fourth quarter operating loss of $508.1 million, parent IAC announced. The mortgage lead company said had 32,300 closing units during the period for $4.1 million, down from 60,100 units for $7.6 million a year earlier.

“This charge reflects the company’s reassessment of the likely future profitability of lending in the face of current mortgage market conditions and the operational strategies undertaken in connection with such market realities,” IAC stated.

Franklin Credit Management Corp. warned about a further delay in filing its Form 10-Q with the Securities and Exchange Commission for the third quarter ended Sept. 30, 2007, because it is still trying to determine its allowance for loan losses. The Jersey City, N.J.-based company originally projected it would make the filing by Jan. 31, delays in the reassessment and related accountants’ review have pushed the date back to March 31 — when it also anticipates filing its annual report.

U.S. Central, a cooperative for credit unions that provides its members with investment, liquidity and cash management services, announced Standard & Poor’s Ratings Services lowered its long-term debt rating to AA+ from AAA. The move was prompted by the recognition of a reduction in the company’s available for sale securities portfolio — which published reports indicate was $760 million on its $40 billion portfolio that included Alt-A and subprime mortgage-backed securities.

Growth prospects are likely to decelerate at real estate investment trusts over the near term, S&P reported.

“From a financial perspective, our generally stable outlook on the REIT sector will depend on whether companies maintain adequate liquidity and stable coverage metrics,” the ratings agency said.

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