Despite billions of dollars in global losses related to U.S. mortgages, a number of mergers are proceeding. Meanwhile, as market liquidity eased slightly, a de-REIT-ization was announced.
Insured U.S. commercial banks lost $10 billion trading cash and derivative instruments in the fourth quarter, down $12 billion from third-quarter revenues of $2 billion, the Office of the Comptroller of the Currency announced Wednesday. OCC attributed the big losses to “well-publicized write-downs on the super senior tranches of collateralized debt obligations backed by subprime residential mortgage securities.”
NovaStar Financial Inc. had a $724 million loss in 2007, according to a filing with the Securities and Exchange Commission Tuesday. During 2006, the company had a $73 million profit.
Franklin Credit Management Corp. announced an $8.6 million fourth-quarter loss primarily due to “the rapid and substantial deterioration in the housing and subprime mortgage markets and deterioration in the performance of the company’s portfolios of acquired and originated loans.” The provision for loan losses rose more than $200 million during 2007.
New York-based Franklin also said that $44.8 million in indebtedness to BOS (USA) Inc. rolled into forebearance, prompting a reduction in interest rate on the debt and leaving BOS with a participation interest.
New York Mortgage Trust Inc. reported Tuesday a $55 million loss last year, worse than the $15 million loss in 2006. Contributing to the loss were $35 million in charges from discontinued operations, a $17 million in MBS-related charges and $2 million related to loan loss reserves for loans held in securitization trust.
Deutsche Bank announced that it anticipates first-quarter mark-downs around EUR 2.5 billion (U.S. $3.9 billion), related to leveraged loans and loan commitments, commercial real estate and primarily Alt-A residential mortgage-backed securities.
UBS estimated that its first-quarter net loss will be around CHF 12 billion (U.S. $12.0 billion). UBS said it created a special unit to manage U.S. real estate interests and replaced Chairman Marcel Ospel with Peter Kurer. The Swiss bank will raise CHF 15 billion (U.S. $15.0 billion).
“Over the first quarter, UBS’s exposure to U.S. residential subprime mortgage-related positions declined to approximately USD $15 billion from USD $27.6 billion on 31 December, and the exposure to Alt-A positions was reduced from USD $26.6 billion to approximately USD $16 billion,” the statement said. “These developments are the result of asset disposals as well as the effects of further writedowns.”
A table published on March 26 by Bloomberg indicates that there have been $208.2 billion in asset writedowns and credit losses stemming from the subprime sector collapse since the beginning of 2007. The biggest casualties were Merrill Lynch, with losses of $25.1 billion; Citigroup, with $23.9 billion in losses and UBS, with $19.0 billion.
Moody’s Investors Service downgraded the debt of FGIC Corp. operating subsidiaries to Baa3 from A3, reflecting its “inability to date to raise new capital, the increased likelihood of FGIC breaching minimum regulatory capital requirements and the effects of its current inability to upstream dividends without prior regulatory approval.”
Triad Guaranty Insurance Corp. will retain its Type I eligibility status from Freddie Mac, despite a downgrade in its debt by Fitch Ratings. Triad is required to submit a written commitment to develop a complete remediation plan for restoring its AA- rating, Freddie announced.
Luminent Mortgage Capital Inc. reported in an SEC filing that an affiliated company filed a Form S-4 registration SEC statement on March 28 in connection with a proposed conversion to a publicly traded partnership as a Delaware limited liability company. It will dump its status as a qualified real estate investment trust.
Thornburg Mortgage Inc. successfully raised $1.35 billion from an offering to “qualified institutional buyers” or “accredited investors” of 18 percent senior subordinated secured notes, the company said in a letter to shareholders. The move secures a one-year moratorium on margin calls by lenders worked out in an earlier deal.
Thornburg President Larry Goldstone said on CNBC that secondary market liquidity continues to be very tight, and yields are “extraordinarily high” on AAA securities.
“Our board of directors determined that the override agreement and capital raise, although highly dilutive for existing shareholders, are in the best long-term interest of the company,” Thornburg stated.
Capstead Mortgage Corp. said in an SEC filing last week that concerns over the pricing of agency-guaranteed MBS have been largely alleviated during the prior week because of Fed actions as well as relaxed requirements at government sponsored enterprises. Recent moves at the company are expected to hurt first-quarter earnings by $4.4 million.
Impac Mortgage Holdings Inc. announced it settled a majority of its outstanding repurchase claims and said it would be late filing its 2007 financials by a 15-day extension deadline.
Fremont General Corp. reported that the Federal Deposit Insurance Corporation, in conjunction with the California Department of Financial Institutions, issued a supervisory prompt corrective action directive on March 26, requiring it to re-capitalize itself by May 26 through either the issuance of more voting shares or a sale of the bank. FDIC has categorized the Fremont as being undercapitalized.
The Federal Reserve Board announced Tuesday the termination of an enforcement action against Sella Holding Banca, S.p.A., Biella, Italy, and related companies on March 26.
The board also announced its approval for JP Morgan Chase & Co. to acquire Bear Stearns Bank & Trust. In response to a run on capital at Bear by institutional investors, that deal was brokered over one weekend by the Federal Reserve in an emergency rescue plan that included $30 billion in Fed financing.
FirstPlus Financial Group Inc. announced Monday it entered into a collateral pledge and subordinated debenture agreement with wholly owned subsidiary Rutgers Investment Group Inc. on Dec. 31. The infusion will boost its ability to pursue licensing and expansion plans.
Resource Mortgage began operating as Fulton Mortgage Co. on March 15 in association with a merger, the company announced.
Cheyenne, Wyo.-based Wallick & Volk Mortgage Bankers announced last week the acquisition of Citizens Mortgage Corp. with four Texas retail branches. Wallick said it has branches in seven states.
Fortress Financial Group Inc. reported a “Heads of Agreement” to acquire Trinity Mercantile Finance Group of Companies, “a substantial mortgage originator.” Fortress announced Monday it was in advanced negotiations to acquire a significant mortgage lending operation as part of a strategy to assemble a subprime consumer finance products group.
First Place Financial Corp. will acquire OC Financial Inc. in a $7.2 million stock merger transaction, the two companies announced. Warren, Ohio-based First Place is the parent of First Place Bank, and Dublin, Ohio-based OC is the parent of Ohio Central Savings. After the closing, the operation will have a total of $3.4 billion in assets, 45 retail branches and 20 loan production offices.
“The combined financial institution would rank as the 33rd largest publicly traded savings institution in the United States and the second largest publicly traded savings institution in Ohio,” the statement said.
National City Corp. announced Tuesday it was considering a range of strategic alternatives and had retained Goldman Sachs as an advisor.
Cleveland-based National City is talking with KeyCorp about a possible merger, the Wall Street Journal reported Wednesday. Citing sources “familiar with the matter,” the story said a possible deal might include a capital infusion from Kohlberg Kravis Roberts & Co.
