Alesco Financial Inc. (AFN) filed Quarterly Report for the period ended 2009-06-30.
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 Financial Inc. is externally managed by Cohen & Company Management LLC a subsidiary of Cohen & Company a leading structured credit investment management firm. Alesco Financial Inc. has a market cap of $45.1 million; its shares were traded at around $0.75 with and P/S ratio of 0.8.
Highlight of Business Operations:
Entities” (“FIN 46R”), which requires that we record the financial position and results of operations of the CDOs in our consolidated financial statements, without consideration that our maximum economic exposure to loss is $90 million. We have effectively written down our remaining $90 million equity investment in the Kleros Real Estate CDOs to zero.
Although we have recorded an allowance for loan losses of $91.0 million on our securitized residential mortgage portfolio and experienced additional impairments and losses on the sale of REO properties, our maximum exposure to loss from our investment in securitized residential mortgages is limited to the $45.6 million that we currently have invested in the securitization. We estimate that the economic value of our direct investments in the subordinated notes of our securitized residential mortgage portfolio is approximately $0.8 million as of June 30, 2009.
We invest in TruPS issued by banks and surplus notes issued by insurance companies through our Alesco CDO subsidiaries. As of June 30, 2009, we have experienced 63 bank deferrals or defaults and one insurance company default in our TruPS portfolio. As of June 30, 2009, the aggregate principal amount of investments in the 64 TruPS investments that have defaulted or are currently deferring interest payments is $1.1 billion, representing approximately 20.6% of the Company’s combined TruPS portfolio. As of June 30, 2009, $386.5 million of defaulted securities have been completely written off in the Company’s consolidated financial statements. For the six-month period ended June 30, 2009, investment interest income is net of a $20.4 million reserve for interest income related to the $1.1 billion of deferring and defaulted securities.
As of June 30, 2009, the Company continues to classify all of the leveraged loans included in its warehouse facility with a third party as held for sale. During the fourth quarter of 2008, the Company determined that it no longer had the intent to hold these particular loans to maturity or for the foreseeable future. During the three and six-month periods ended June 30, 2009, the Company recorded increases of $23.0 million and $63.0 million, respectively to the fair value of these leveraged loans. The fair value increases were primarily attributable to a tightening of estimated credit spreads as evidenced by comparable market leveraged loan data. The warehouse facility that provides short-term financing for approximately $143.3 million of par value of leveraged loans matured in May 2009 and, as previously disclosed, is currently in default. The Company expects that the warehouse lender will liquidate all of the $143.3 million of par value of leveraged loans during the third quarter of 2009. As a result of the liquidation of the collateral, the Company will likely lose the first loss cash that is deposited with the warehouse lender in the amount of $38.5 million, which is the maximum amount of loss that the Company is exposed to from the warehouse facility.
On October 10, 2008, the Company was notified by the NYSE that it was not in compliance with an NYSE continued listing standard applicable to its common stock. The standard requires that the average closing price of any listed security not fall below $1.00 per share for any consecutive 30 trading-day period. On October 15, 2008, the Company notified the NYSE of its intent to cure this deficiency. After exploring different alternatives for curing the deficiency and restoring compliance with the continued listing standards, the Company currently expects to effectuate a 1 for 10 reverse stock split of the outstanding shares of its common stock. Under the NYSE rules, the Company has six months from the date of the NYSE notice to comply with the NYSE minimum share price standard. If the Company is not compliant by that date, its common stock will be subject to suspension and delisting by the NYSE. However, on February 26, 2009, the NYSE granted NYSE-listed companies a reprieve from the NYSE’s $1 minimum price requirement until June 30, 2009, which reprieve was subsequently extended for an additional month through July 31, 2009. In addition, the NYSE permanently decreased its market-capitalization standard to $15 million for listed companies, which previously required that average market capitalization of a NYSE-listed company be at least $25 million over any 30 consecutive trading day period. We therefore have until September 13, 2009 to become compliant with the NYSE minimum share price standard. If we fail to meet any of the NYSE’s other listing standards, however, we may be delisted for failing to comply with the continued listing standards.
During the year ended December 31, 2008, we repurchased and retired $111.4 million par value of our outstanding convertible debt securities for $50.6 million. We realized a gain of $56.4 million on these transactions, net of a $2.7 million write-off of related deferred costs and a $1.6 million discount.
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