Anthracite Capital, Inc. (NYSE:AHR) (the "Company" or
"Anthracite") reported net loss available to common stockholders
for the third quarter of 2009 of $(0.51) per share, compared to
$(0.03) per share for the same three-month period in 2008. (All
currency amounts discussed herein are in thousands, except share
and per share amounts. All per share information is presented on a
diluted basis. Prior year amounts have been restated for the
adoption of recently issued guidance related to accounting for
convertible debt instruments).
Operating Earnings (defined below) for the third quarters of
2009 and 2008 were $0.03 and $0.32 per share, respectively.
Operating Earnings is a non-GAAP measure. Table 1, provided below,
reconciles Operating Earnings per share to diluted net income
(loss) per share available to common stockholders.
Update on Financial Condition
Given the circumstances described below, substantial doubt
continues to exist about the Company's ability to continue as a
going concern.
As of September 30, 2009, the Company had $297 of unrestricted
cash and cash equivalents, compared with $9,686 at December 31,
2008. As described in further detail below, the Company failed to
meet amortization payment requirements under its secured facilities
with Bank of America, Deutsche Bank and Morgan Stanley (the
"secured bank facilities") and has until December 29, 2009 to cure
such shortfall (as of November 1, 2009, over $1,315) or an event of
default will occur. During the cure period, all the cash flows from
the Company's assets are being diverted to a cash management
account for the benefit of the Company's secured bank lenders
subject to limited exceptions approved by them.
The Company did not make interest payments due on October 30,
2009 (approximately $1,554) on three series of its senior notes.
Under the indentures governing these notes, the failure to make an
interest payment is subject to a 30-day cure period before
constituting an event of default. Unless the secured bank lenders
allow the Company to access some of the cash flow currently being
diverted into the cash management account or the holders of these
notes agree to a refinancing or agree to waive the defaults, the
Company will not be able to make interest payments on these notes
and events of default will occur on November 30, 2009. An event of
default under these notes, absent a waiver, would trigger
cross-default and cross-acceleration provisions in the Company’s
secured bank facilities and its credit facility with BlackRock
Holdco 2, Inc. ("Holdco 2") and, if any such debt were accelerated,
would trigger a cross-acceleration provision in the Company’s
convertible notes indenture. If acceleration were to occur, the
Company would not have sufficient liquid assets available to repay
such indebtedness and, unless the Company was able to obtain
additional capital resources or waivers, the Company would be
unable to continue to fund its operations or continue its
business.
In addition, for the quarter ended September 30, 2009, the
Company is in breach of a covenant in its secured bank facilities
that requires the Company's operating earnings (as defined in the
applicable secured bank facility) not be less than a specified
amount at quarter end. Unless waived, this breach could lead to an
event of default and acceleration and lead to the consequences
described in the preceding paragraph. The Company also continues to
be in breach of the covenant in its secured facility with Holdco 2
that requires the Company to immediately repay outstanding
borrowings under the facility to the extent outstanding borrowings
exceed 60% of the fair market value (as determined by the Company's
manager, BlackRock Financial Management, Inc. (the ''Manager'')) of
the shares of common stock of Carbon Capital II, Inc. (''Carbon
II'') securing such facility. In March 2009, Holdco 2 waived the
Company's failure to repay borrowings in accordance with this
covenant until April 1, 2009 and subsequently extended this waiver
until January 22, 2010.
Based on the Company's current liquidity situation, the Company
continues to seek ways to refinance or restructure its indebtedness
and is focused on negotiations with its secured bank lenders and
unsecured noteholders to cure or obtain a waiver for missed
interest payment and amortization payment defaults and covenant
breaches.
Effect of Market Conditions on the Company's Business
Although the capital markets have shown recent signs of
stabilizing after a prolonged economic downturn and credit crisis,
the Company's assets linked to the U.S. and non-U.S. commercial
real estate finance markets continue to be adversely affected as
the market value of commercial real estate assets has not recovered
and delinquencies have risen significantly for CMBS and commercial
real estate loans. These adverse effects include:
- Adverse impact on liquidity. As
a result of a continued rise in delinquencies for commercial real
estate loans and CMBS during 2009, the Company's cash flow has been
materially and adversely affected. This negative trend has
continued into the fourth quarter of 2009 and the Company believes
this negative trend will continue into the foreseeable future. As a
result of the decline in the cash flows from the Company's assets,
the Company was unable to make the full September 30, 2009
amortization payments required under its secured bank facilities
for two of its three lenders. Pursuant to amendments to its secured
bank facilities which closed in May 2009, the Company is required
to make payments to reduce the principal balances under the
facilities by certain specified amounts as of the end of each
quarter, commencing for the quarter ended September 30, 2009. The
Company was only able to make the full required amortization
payment under its facility with Morgan Stanley. In addition,
separate and apart from the aforementioned amortization payment
obligations, the Company was unable to make the entire amount of a
monthly $1,250 amortization payment under its facility with Morgan
Stanley due October 31, 2009. The Company has 90 days after the end
of any applicable quarter to cure such aggregate amortization
payment shortfall or an event of default will occur. During the
cure period, all the cash flows from the Company's assets are being
diverted to a cash management account for the benefit of the
Company's secured bank lenders subject to limited exceptions
approved by the secured bank lenders. In the event the secured bank
lenders do not allow the Company access to the diverted cash flows,
the Company will not be able to make payments due on its unsecured
debt and will be unable to pay general and administrative expenses.
As a result, the Company may default on its obligations under its
unsecured debt and be unable to continue as a going concern. In
addition, the Company’s current projections show that, even if the
Company cures the aggregate amortization payment shortfall by
December 29, 2009 (i.e., within the 90-day period), the Company
will not be able to make the required amortization payments for the
quarter ended December 31, 2009. In such event, the Company would
need to cure such shortfall by March 31, 2010 to avoid an event of
default.
- Negative operating results
during the nine months ended September 30, 2009 and the year ended
December 31, 2008. For the nine months ended September 30, 2009,
the Company incurred a net loss available to common stockholders of
$(132,508) driven primarily by significant net realized and
unrealized losses, the incurrence of a $(98,999) provision for loan
losses and a significant decline in interest income due to rising
delinquencies on the Company's CMBS and commercial real estate
loans. For the year ended December 31, 2008, the Company incurred a
net loss available to common stockholders of $(258,050), driven
primarily by significant net realized and unrealized losses, the
incurrence of a $(165,928) provision for loan losses and a loss
from equity investments of ($53,630).
- Substantial doubt about the
ability to continue as a going concern. Substantial doubt continues
to exist about the Company's current ability to continue as a going
concern. The Company's independent registered public accounting
firm issued an opinion on the Company's December 31, 2008
consolidated financial statements that stated the consolidated
financial statements were prepared assuming the Company will
continue as a going concern and further stated that the Company's
liquidity position, current market conditions and the uncertainty
relating to the outcome of the Company's then ongoing negotiations
with its secured bank lenders raised substantial doubt about the
Company's ability to continue as a going concern.
- Elimination of dividends. The
Company's Board of Directors (the "Board of Directors") has not
declared any dividend on the Company's common stock or the
Company's preferred stock during 2009. The Board of Directors
anticipates that the Company will only pay cash dividends on its
preferred and common stock, if such cash is available, to the
extent necessary to maintain its REIT status until the Company's
liquidity position has improved and subject to restrictions in the
Company's debt instruments.
- NYSE Listing. On September 15,
2009, the Company was notified by the New York Stock Exchange, Inc.
(the "NYSE") that the average per share price of the Company's
common stock was below the NYSE's continued listing standard that
requires that the average closing price of listed common stock be
no less than $1.00 per share over a consecutive 30 trading-day
period (the "Price Condition"). The Company notified the NYSE that
it intends to cure the Price Condition deficiency by effecting a
reverse stock split, subject to stockholder approval. The notice
provides that the Company must obtain stockholder approval by no
later than its next annual meeting (scheduled on May 18, 2010) and
must implement the reverse stock split promptly thereafter. If the
Company has not cured the Price Condition deficiency by that date,
the common stock will be subject to suspension and delisting by the
NYSE, which would result in defaults under certain of the Company's
debt instruments. The exact ratio of the reverse stock split will
be determined based on the facts and circumstances at a later
date.
Completed Initiatives to Restructure Debt
Since May 2009, the Company, in addition to amending its secured
bank facilities in May 2009, restructured a significant portion of
its unsecured debt and thereby reduced its near-term interest
expense.
Equity-for-Debt Exchanges
From May through September 2009, the Company completed a number
of equity-for-debt exchanges with holders of its 11.75% Convertible
Senior Notes due 2027 (the "convertible notes") pursuant to which
the Company acquired and canceled over half of the outstanding
amount of convertible notes. In these exchanges, the Company issued
an aggregate of 14,997,000 shares of its common stock for $40,981
aggregate principal amount of convertible notes. Holders in these
exchanges generally released the Company from paying them any
accrued and unpaid interest on the exchanged convertible notes.
As of November 1, 2009, $39,019 aggregate principal amount of
convertible notes remained outstanding.
Junior Subordinated Debt Exchanges
From May through October 2009, the Company restructured all of
its junior subordinated debt, comprised of trust preferred
securities of its subsidiary capital trusts or related obligations
and euro-denominated junior subordinated notes, as described
below.
In May 2009 and July 2009, the Company completed exchanges with
holders of $160,000 aggregate liquidation amount of trust preferred
securities of its three subsidiary capital trusts and holders of
€50,000 aggregate principal amount of the Company's
euro-denominated junior subordinated notes. The Company issued new
notes with a significantly reduced initial interest rate (0.75% per
year) for up to four years (the "junior debt modification period")
and with a higher principal amount (125% of the principal or
liquidation amount of the securities exchanged).
In October 2009, the Company and the holder of $15,000 aggregate
liquidation amount of trust preferred securities agreed to amend
those securities in accordance with the terms of the May 2009 and
July 2009 new notes.
Holders in these exchanges permitted the Company to
retrospectively apply the significantly reduced initial interest
rate to the most recently completed interest period for which
payment had not been previously made.
After the junior debt modification period, the interest rates of
the new notes and trust preferred securities return to the
original, higher rates of the securities for which they were
exchanged or from which they were amended. In addition, during the
junior debt modification period, the Company will be subject to
limitations on its ability to pay cash dividends on its common or
preferred stock or redeem, purchase or acquire any equity
interests, and to become liable for new debt other than trade debt
or similar debt incurred in the ordinary course of business and
debt in exchange for or to provide the funds necessary to
repurchase, redeem, refinance or satisfy the Company's existing
secured and senior unsecured debt (collectively, the "new junior
debt covenants"). In addition, during the junior debt modification
period, the cure period for a default in the payment of interest
when due is three days. The new notes and trust preferred
securities otherwise generally have the same terms, including
maturity dates, as the securities for which they were exchanged or
from which they were amended.
Senior Notes Exchanges
In October 2009, the Company restructured $64,500 aggregate
principal amount of its 7.22% Senior Notes due 2016, 7.20% Senior
Notes due 2016 and 7.772%-to-Floating Rate Senior Notes due 2017.
The senior notes exchanges were similar in structure to the junior
subordinated debt exchanges. The Company issued new notes with a
significantly reduced initial interest rate (1.25% per year) for up
to four years (the "senior notes modification period") and with a
higher principal amount (120% of the principal amount of the notes
exchanged).
Holders in these exchanges permitted the Company to
retrospectively apply the significantly reduced initial interest
rate to the most recently completed interest period.
After the senior notes modification period, the interest rates
of the new notes return to the original, higher rates of the notes
for which they were exchanged. In addition, during the senior notes
modification period, pursuant to the applicable indentures, the
Company is subject to new covenants similar to the new junior debt
covenants and additional covenants. In addition, during the senior
notes modification period, the cure period for a default in the
payment of interest when due is three days. The new notes otherwise
generally have the same terms, including maturity dates, as the
notes for which they were exchanged.
As of November 1, 2009, $13,750 aggregate principal amount of
the Company's 7.22% Senior Notes due 2016, $18,750 aggregate
principal amount of its 7.20% Senior Notes due 2016, $28,000
aggregate principal amount of its 7.772%-to-Floating Rate Senior
Notes due 2017, and the entire $37,500 aggregate principal amount
of its 8.1275%-to-Floating Rate Senior Notes due 2017 are
outstanding and have not been restructured.
Projected Cash Interest Payment Savings during Modification
Period
The Company estimates that the effect of the combined unsecured
restructurings and exchanges will result in cash savings of over
$22,000 per year during the period that the lower coupons are in
effect, excluding the impact of certain one-time fees paid in
connection with the completion of the restructurings and exchanges.
The Company intends to use cash from these savings to reduce
indebtedness under its secured bank facilities.
Short-form registration statements
The failure to file in a timely manner all required periodic
reports with the SEC for a period of twelve months or to otherwise
comply with eligibility requirements has made the Company
ineligible to use a Registration Statement on Form S-3. While it is
ineligible, the Company may use a Registration Statement on Form
S-1, but may find raising capital to be more expensive and, if the
SEC reviews any Registration Statement on Form S-1
of the Company, subject to delay.
CDO tests
In addition to the covenants under the Company's secured bank
facilities, four of the seven CDOs issued by the Company contain
compliance tests which, if violated, could trigger a diversion of
cash flows from the Company to bondholders of the CDOs. The
Company's three CDOs designated as its high yield (''HY'') series
do not have any compliance tests. The chart below is a summary of
the Company's CDO compliance tests as of September 30, 2009.
Cash Flow Triggers CDO I CDO II CDO III
Euro CDO Overcollateralization Current 125.9% 126.0%
118.4% 80.5% Trigger 115.6% 113.2% 108.9% 116.4% Pass/Fail Pass
Pass Pass Fail Interest Coverage/ Interest Reinvestment Current
206.5% 168.8% 305.3% 80.5% Trigger 108.0% 117.0% 111.0% 116.4%
Pass/Fail Pass Pass Pass Fail Collateral Quality Tests CDO I
CDO II CDO III Euro CDO Weighted Average Life Test Current N/A N/A
N/A 3.25 Trigger N/A N/A N/A 7.25 Pass/Fail N/A N/A N/A Pass
Minimum Weighted Average Recovery Rate Test Moody's Current N/A N/A
N/A 25.1% Trigger N/A N/A N/A 18.0% Pass/Fail N/A N/A N/A Pass
Vector Model Test Fitch Pass/Fail N/A N/A N/A Fail Weighted Average
Rating Factor Test Moody's Current N/A N/A N/A 2385 Trigger N/A N/A
N/A 2740 Pass/Fail N/A N/A N/A Pass
Because the failures of the Anthracite Euro CRE CDO 2006-1’s
(“Euro CDO”) overcollateralization tests were not cured by the May
15, 2009 payment date, any cash flows that remained after the
payment of interest to the Class A and Class B senior notes were
utilized to pay down the principal of the Class A notes. This
redirection of cash flows will continue until the failures of the
Class A through Class D overcollateralization tests are cured.
Additionally, the Euro CDO failed its interest coverage test for
its preferred shares, which are held by the Company. This test is
calculated in the same manner as the Class E overcollateralization
test. Since the Euro CDO's preferred shares are pledged to one of
the Company's secured bank lenders, the cash flow available to pay
down the lender's outstanding balance has been reduced.
The chart below summarizes the cash flows received from the
fourth quarter 2008 through the third quarter of 2009 from the
Company's retained CDO bonds.
4Q 2008 1Q 2009 2Q 2009 3Q 2009 CDO I
$1,615 $1,524 $2,062 $1,215 CDO II 1,029 652
1,174 622 CDO III 1,000 617 956 911 CDO HY1 1,106 1,580 719 168 CDO
HY2 1,756 1,989 1,945 1,649 CDO HY3 3,583 4,243 3,074 2,238 Euro
CDO 3,248 4,503 - - Total $13,336
$15,108 $9,930
$6,803
Commercial Real Estate Loans
The Company did not record any additional provisions for
specific loan losses for the three months ended September 30, 2009.
The Company also reduced the general provision by $4,308. The
general loan loss provision methodology is more fully described in
the Company's 2008 Annual Report on Form 10-K for the year ended
December 31, 2008.
A summary of the changes in the Company's reserve for loan
losses is as follows:
General Specific Total Reserve for loan
losses, June 30, 2009 (including accrued interest of $2,347)
$44,710 $228,618 $273,328 Reserve for loan losses-
specific - - - Reserve for loan losses- general (5,532 ) -
(5,532 ) Provision for loan losses for three months
ended September 30, 2009 (5,532 ) - (5,532 )
Charge-off* (24,217 ) (24,217 ) Foreign currency gain 1,223
3,042 4,265 Reserve for loan losses,
September 30, 2009 (including accrued interest of $2,187) $40,401
$207,443 $247,844
* For the three months ended September 30, 2009, the Company
incurred a charge-off of $24,217 related to a realized loss on one
loan.
The Company's formula-based general reserve calculation (as more
fully described in the Company's 2008 Annual Report on Form 10-K
for the year ended December 31, 2008) resulted in a decrease of
$5,532 for the general loan loss provision for the three months
ended September 30, 2009.
The general reserve of $40,401 represents approximately 6% of
the carrying value of the loans against which the Company has not
specifically reserved. The specific reserve of $207,443 represents
approximately 77% of carrying value of ten specific loans.
The chart below summarizes the outstanding principal balance,
carrying value, and loan loss reserves for the commercial real
estate loans held directly by the Company at September 30,
2009.
OutstandingPrincipalBalance
CarryingValue
Loan LossReserve
Net CarryingValue
Retail $309,088 $300,800 $(7,453 ) $293,347
Office 227,716 224,213 (39,593 ) 184,620 Multifamily 165,092
164,826 (124,264 ) 40,562 Various 124,073 121,334 (32,760 ) 88,574
Storage 71,978 71,870 - 71,870 Hotel 14,346 13,777 - 13,777
Industrial 12,307 12,266 - 12,266 Other 3,989 3,941 -
3,941 $928,589 $913,027
$(204,070)* $708,957 General loan loss reserve
(40,401 ) Net Carrying Value $668,556
* Excludes $2,187 of accrued interest and $1,186 of loan related
expenses.
Earnings from Equity Investments
Also included in commercial real estate loans are the Company's
investments in Carbon Capital, Inc. ("Carbon I") and Carbon Capital
II, Inc. ("Carbon II" and together with Carbon I, the "Carbon
Funds"), which are managed by the Company's manager. For the
quarters ended September 30, 2009 and 2008, respectively, the
Company recorded losses of $(2,624) and income of $1,972 for the
Carbon Funds. The investment periods for the Carbon Funds have
expired and no new portfolio additions are expected.
The Company's investments in the Carbon Funds were as
follows:
September 30, 2009 December 31, 2008 Carbon I $1,710
$1,713 Carbon II 17,850 39,158 $19,560 $40,871
Carbon II recorded a provision for loan losses of $3,095 for the
three months ended September 30, 2009 which includes a net
decrease of a general provision of $325 and a provision of $2,770
related to two loans with an aggregate principal balance of
$14,438. The loans are in various stages of resolution and due to
the estimated fair value of the underlying collateral being below
the principal balance of the loans, Carbon II does not believe the
full collectability of the loans is probable. The Company incurs
its share of Carbon II's operating results through its
approximately 26% ownership interest in Carbon II.
Commercial Real Estate Securities
The Company considers CMBS where it maintains the right to
control the foreclosure/workout process on the underlying loans as
controlling class CMBS ("Controlling Class CMBS"). The Company owns
Controlling Class CMBS issued in 1998, 1999 and 2001 through
2007.
The Company did not acquire any additional Controlling Class
CMBS trusts during the third quarter of 2009. At September 30,
2009, the Company owned 39 Controlling Class CMBS trusts with an
aggregate underlying loan principal balance of $56,106,168.
Delinquencies of 30 days or more on these loans as a percent of
current loan balances were 5.6% at September 30, 2009, compared
with 5.2% at June 30, 2009.
The chart below summarizes the par, weighted average coupon,
market value, adjusted purchase price and third quarter 2009
estimated loss assumptions for the Company's U.S. dollar
denominated Controlling Class CMBS:
Vintage
Par
WeightedAverageCoupon
MarketValue
AdjustedPurchasePrice(1)
EstimatedCollateralLosses
1998 $260,667 6.1 % $145,979 $139,919
$136,256 1999 7,604 6.9 3,802 3,173 13,989 2001 34,790 6.1
18,121 28,862 13,610 2002 2,300 5.7 1,245 2,268 20,428 2003 78,209
4.9 25,884 49,452 55,142 2004 75,445 5.1 11,991 11,216 196,498 2005
213,362 5.0 9,957 26,422 353,214 2006 452,099 5.2 31,043 39,289
395,274 2007 678,641 5.2 48,143 54,122
1,111,893 Total $1,803,117 5.3 % $296,165
$354,723 $2,296,304
(1) Adjusted purchase price is inclusive of mark-to-market
losses taken since purchase
During the three months ended September 30, 2009, no securities
of the Company's Controlling Class CMBS were upgraded and 66
securities in 16 Controlling Class CMBS were downgraded by at least
one rating agency. Additionally, at least one rating agency
upgraded two of the Company's non-Controlling Class commercial real
estate securities and downgraded 15.
Summary of Commercial Real Estate Assets
A summary of the Company's commercial real estate assets with
estimated fair values in local currencies and U.S. dollars at
September 30, 2009 is as follows:
CommercialReal EstateSecurities(2)
CommercialReal EstateLoans
(1)
CommercialReal EstateEquity
CommercialMortgageLoan Pools
TotalCommercialReal EstateAssets
TotalCommercialReal EstateAssets (USD)
% of Total
USD $765,239 $204,752 - $939,646
$1,909,637 $1,909,637 76.6 % GBP £3,429 £43,580 - -
£47,009 75,183 3.0 % EUR €17,108 €290,921 - - €308,029 450,247 18.1
% CAD C$60,290 C$6,272 - - C$66,562 62,018
2.5
%
JPY ¥374,580 - - - ¥374,580 4,184
0.2
%
CHF - CHF 23,848 - - CHF 23,848 22,982
0.9
%
INR - - Rs 446,931 - Rs 446,931
9,350
0.4
%
General loan loss reserve - $(40,401 ) - -
$(40,401 ) (40,401 ) (1.7 )% Total USD
Equivalent $856,088 $688,116 $9,350
$939,646 $2,493,200 $2,493,200
100.0
%
(1) Includes the carrying value of the Company's investment in
AHR JV of $448 at December 31, 2008.
(2) Includes the carrying value of the Company's investments in
the Carbon Funds of $40,871 and AHR International JV of $28,199 at
December 31, 2008. In January 2009, in connection with the
amendment and extension of the Company's secured bank facility with
Morgan Stanley, the Company transferred its entire interest in
Anthracite International JV's sole investment, an investment in
non-U.S. commercial mortgage loan, to AHR MS, which then posted the
asset as additional collateral under the facility.
As of January 2009, the Company substantially reduced the use of
various currency instruments to hedge the capital portion of its
foreign currency risk. The Company reduced the use of such
instruments in an effort to avoid cash outlays caused by the
requirement to mark these instruments to market. The Company has
been primarily focused on preserving cash to pay down secured bank
lenders and maintaining these hedges creates unpredictable cash
flows as currency values move in relation to each other.
Book Value Per Share
The chart below is a comparison of book value per share at
September 30, 2009 and December 31, 2008.
9/30/2009
12/31/2008
Total Stockholders' Equity $490,361 $572,131* Less:
Series C Preferred Stock Liquidation Value (57,500 ) (57,500 )
Series D Preferred Stock Liquidation Value (86,250 ) (86,250 )
Preferred Dividends in Arrears** (12,206 ) - Common
Equity $334,405 $428,381 Common Shares Outstanding 93,951,522
78,371,715 Book Value per Share $3.56 $5.46
* On January 1, 2009, the Company adopted ASC 470-20 (formerly
FSP APB 14-1), which superseded ASC 825-10 (formerly FAS 159) with
respect to the Company's fair valuing its convertible debt and
decreased the Company's GAAP book value by $45,361, or $0.58 per
share. The impact of adopting ASC 470-20 is outlined in the
Company's Quarterly Report on Form 10-Q filing for the quarter
ended September 30, 2009.
** The Company elected not to declare any of the specified
dividends on its three series of preferred stock during 2009. At
September 30, 2009, $12,206 of preferred dividends were in arrears.
These dividends in arrears are included as part of dividends on
preferred stock on the consolidated statements of operations since
they represent a claim on earnings superior to common stockholders.
These dividends in arrears have not been accrued as dividends
payable since they have not been declared.
Reconciliation of Operating Earnings (Deficit) Per Share to
Net Income (Loss) Available to Common Stockholders Per Share (Table
1)
The table below reconciles Operating Earnings with diluted net
income available to common stockholders:
Three Months Ended
Nine Months Ended September 30, September 30, 2009
2008 2009 2008 Operating earnings available to
common stockholders $0.03 $0.32 $0.17 $0.93 Net
realized and change in unrealized gain (loss) (0.69 ) (0.19 ) (0.73
) 0.86 Incentive fee attributable to other gains - - - (0.13 ) Net
foreign currency gain (loss) and hedge ineffectiveness 0.09 0.09
0.15 (0.04 ) Provision for loan loss 0.06 (0.25 )
(1.23 ) (0.55 ) Diluted net income (loss) available
to common stockholders $(0.51 ) $(0.03 ) $(1.64 )
$1.07
The Company considers its Operating Earnings to be net income
after operating expenses, income taxes and preferred dividends but
before net realized and change in unrealized gain (loss), incentive
fees attributable to other income (loss), dedesignation of
derivative instruments, net foreign currency gain (loss), hedge
ineffectiveness and provision for loan losses. The Company believes
Operating Earnings to be an effective indicator of the Company's
profitability and financial performance over time. Operating
Earnings can and will fluctuate based on changes in asset levels,
funding rates, available reinvestment rates and expected losses on
credit sensitive positions.
This release, including the reconciliation of Operating Earnings
with net income available to common stockholders, is also available
on the News section of the Company's website at
www.anthracitecapital.com.
Earnings Conference Call
The Company will host a conference call on November 10, 2009 at
9:00 a.m. (Eastern Time). The conference call will be available
live via telephone. Members of the public who are interested in
participating in Anthracite's third quarter earnings teleconference
should dial, from the U.S., (800) 374-0176, or from outside the
U.S., (706) 679-4634, shortly before 9:00 a.m. and reference the
Anthracite Teleconference Call (number 39786858). Please note that
the teleconference call will be available for replay beginning at
1:00 p.m. on Tuesday, November 10, 2009, and ending at midnight on
Tuesday, November 17, 2009. To access the replay, callers from the
U.S. should dial (800) 642-1687 and callers from outside the U.S.
should dial (706) 645-9291 and enter conference identification
number 39786858.
About Anthracite
Anthracite Capital, Inc. is a specialty finance company
focused on investments in high yield commercial real estate loans
and related securities. Anthracite is externally managed by
BlackRock Financial Management, Inc., which is a subsidiary of
BlackRock, Inc. ("BlackRock") (NYSE:BLK), one of the largest
publicly traded investment management firms in the United States
with approximately $1.435 trillion in global assets under
management at September 30, 2009. BlackRock Realty Advisors, Inc.,
another subsidiary of BlackRock, provides real estate equity and
other real estate-related products and services in a variety of
strategies to meet the needs of institutional investors.
Forward-Looking Statements
This release, and other statements that Anthracite may make, may
contain forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995, with respect to
Anthracite's future financial or business performance, strategies
or expectations. Forward-looking statements are typically
identified by words or phrases such as "trend," "potential,"
"opportunity," "pipeline," "believe," "comfortable," "expect,"
"anticipate," "current," "intention," "estimate," "position,"
"assume," "outlook," "continue," "remain," "maintain," "sustain,"
"seek," "achieve," and similar expressions, or future or
conditional verbs such as "will," "would," "should," "could," "may"
or similar expressions.
Anthracite cautions that forward-looking statements are subject
to numerous assumptions, risks and uncertainties, which change over
time. Forward-looking statements speak only as of the date they are
made, and Anthracite assumes no duty to and does not undertake to
update forward-looking statements. Actual results could differ
materially from those anticipated in forward-looking statements and
future results could differ materially from historical
performance.
In addition to factors previously disclosed in Anthracite's SEC
reports and those identified elsewhere in this release, the
following factors, among others, could cause actual results to
differ materially from forward-looking statements or historical
performance: (1) as a result of its liquidity position, current
commercial real estate market conditions and the uncertainty
relating to its ability to meet covenants in restructured
agreements, substantial doubt about the Company's ability to
continue as a going concern; (2)the Company's ability to meet its
liquidity requirements to continue to fund its operations,
including its ability to renew its existing secured credit
facilities or obtain additional sources of financing, to meet
amortization payments under the facilities and to service debt
(including interest payment obligations not paid when originally
due); (3) the Company's ability to obtain amendments and waivers in
the event that a secured bank lender terminates a facility before
the maturity date or events of default occur under the Company's
debt obligations due to a covenant breach or otherwise; (4) the
Company's ability to maintain listing on the NYSE; (5) the
introduction, withdrawal, success and timing of business
initiatives and strategies; (6) changes in political, economic or
industry conditions, the interest rate environment, financial and
capital markets or otherwise, which could result in changes in the
value of the Company's assets and liabilities, including net
realized and unrealized gains or losses, and could adversely affect
the Company's operating results; (7) the relative and absolute
investment performance and operations of BlackRock Financial
Management, Inc. (the ''Manager''), the Company's Manager; (8) the
impact of increased competition; (9) the impact of future
acquisitions or divestitures; (10) the unfavorable resolution of
legal proceedings; (11) the impact of legislative and regulatory
actions and reforms and regulatory, supervisory or enforcement
actions of government agencies relating to the Company or the
Manager; (12) terrorist activities and international hostilities,
which may adversely affect the general economy, domestic and global
financial and capital markets, specific industries, and the
Company; (13) the ability of the Manager to attract and retain
highly talented professionals; (14) fluctuations in foreign
currency exchange rates; and (15) the impact of changes to tax
legislation and, generally, the tax position of the Company.
Anthracite's Annual Report on Form 10-K for the year ended
December 31, 2008 and Anthracite's subsequent filings with the SEC,
accessible on the SEC's website at www.sec.gov, identify additional
factors that can affect forward-looking statements.
To learn more about Anthracite, visit our website at
www.anthracitecapital.com. The information contained on the
Company's website is not a part of this release.
Anthracite Capital, Inc. and
Subsidiaries
Consolidated Statements of
Financial Condition (Unaudited)
(dollar amounts in
thousands)
September 30, 2009
December 31, 2008
ASSETS Cash and cash equivalents $297 $9,686
Restricted cash equivalents 38,939 23,982 RMBS 11 787 Commercial
mortgage loan pools $939,646 $1,022,105 Commercial real estate
securities 856,087 935,963 Commercial real estate loans, (net of
loan loss reserve of $244,271 and $164,282 in 2009 and 2008)
688,117 823,777 Commercial real estate 9,350 9,350
Total commercial real estate 2,493,200 2,791,195 Derivative
instruments, at estimated fair value 26,463 929,632 Other assets
(includes $31 and $384 at estimated fair value in 2009 and 2008)
42,215 73,766 Total Assets $2,601,125
$3,829,048
LIABILITIES AND STOCKHOLDERS'
EQUITY
Liabilities: Short-term borrowings: Secured by pledge of commercial
real estate securities $228,361 $308,123 Secured by pledge of
commercial mortgage loan pools 4,584 4,584 Secured by pledge of
commercial real estate loans 152,090 167,625 Total short-term
borrowings 385,035 $480,332 Long-term borrowings: Collateralized
debt obligations (at estimated fair value) 544,015 564,661 Secured
by pledge of commercial mortgage loan pools 918,452 999,804 Senior
unsecured notes (at estimated fair value) 14,040 18,411 Junior
unsecured notes (at estimated fair value) 14,073 5,726
Junior subordinated notes to
subsidiary trust issuing preferred securities (at estimated fair
value)
1,030
12,643
Convertible senior unsecured notes 35,766 72,000 Total long-term
borrowings 1,527,376 1,673,245 Total borrowings
1,912,411 2,153,577 Distributions payable - 3,019 Derivative
instruments, at estimated fair value 92,199 1,018,927 Other
liabilities 59,680 34,920 Total Liabilities 2,064,290
3,210,443 12% Series E-1 Cumulative Convertible
Redeemable Preferred Stock, liquidation preference $23,375
23,237
23,237 12% Series E-2 Cumulative Convertible Redeemable Preferred
Stock, liquidation preference $23,375
23,237
23,237 Stockholders' Equity: Preferred Stock, 100,000,000
shares authorized; 9.375% Series C Preferred Stock, liquidation
preference $57,500 55,435 55,435 8.25% Series D Preferred Stock,
liquidation preference $86,250 83,259 83,259 Common Stock, par
value $0.001 per share; 400,000,000 shares authorized;
93,951,522 and 78,371,715 shares
issued and outstanding in 2009 and 2008
94 78 Additional paid-in capital 810,236 797,372 Distributions in
excess of earnings (451,915 ) (331,613 ) Accumulated other
comprehensive loss (6,748 ) (32,400 ) Total Stockholders' Equity
490,361 572,131 Total Liabilities and Stockholders'
Equity $2,601,125 $3,829,048
Anthracite Capital, Inc. and
Subsidiaries
Consolidated Statements of
Operations (Unaudited)
(in thousands, except per share
data)
For the Three Months
EndedSeptember 30,
For the Nine Months EndedSeptember
30,
2009 2008
2009
2008
Operating Portfolio Income:
Commercial real estate securities $35,533 $ 53,374 $ 129,667
156,171 Commercial mortgage loan pools 9,901 12,779 30,249 38,445
Commercial real estate loans 12,571 22,674 41,837 69,506 Income
(loss) from equity investments (2,604 ) 3,067 (21,294 ) 2,510 Cash
and RMBS 226 571 723
2,630 Total Income 55,627 92,465
181,182 269,262 Expenses: Interest expense:
Short-term borrowings 6,549 9,560 19,969 29,471 Collateralized debt
obligations 19,829 26,048 61,676 77,197 Commercial mortgage loan
pools 9,965 12,089 30,259 36479 Senior unsecured notes 3,089 3,072
9,280 9,146 Convertible senior notes 2,420 2,874 8,007 8,501 Junior
unsecured notes 2,223 1,434 3,965 4,204 Junior subordinated notes
323 3,354 3,162 9,949 General and administrative expense 2,318
2,025 11,284 5,706 Management fee 1,817 3,050 5,901 9,286 Incentive
fee - - - 1,963 Incentive fee – stock based 185 382
490 1,426 Total Expenses 48,718
63,888 153,993 193,328
Income from the Operating Portfolio 6,909
28,577 27,189 75,934
Other income (loss): Net realized and change in unrealized
gain (loss) (58,820 ) (13,931 ) (51,154 ) 69,918 Incentive fee
attributable to other gains - - - (9,916 ) Dedesignation of
derivative instruments - - (7,840 ) - Provision for loan loss 5,532
(18,752 ) (98,999 ) (43,942 ) Foreign currency gain (loss) 7,585
7,273 11,946 (2,913 ) Hedge ineffectiveness - (770 )
64 533 Total other income (loss)
(45,703 ) (26,180 ) (145,983 ) 13,680
Net Income (loss) (38,794 ) 2,397
(118,794 ) 89,614 Dividends on preferred stock (4,656
) (4,529 ) (13,714 ) (12,738 ) Net Income
(Loss) available to Common Stockholders $(43,450 ) $(2,132 )
$(132,508 ) $76,876 Operating Earnings:
Income from the Operating Portfolio $6,909 $28,577 $27,187 75,934
Dividends on preferred stock (4,656 ) (4,529 )
(13,714 ) (12,738 ) Net Operating Earnings $2,253
$24,048 $13,473 $63,196
Operating Earnings available to Common Stockholders per
share: Basic $0.03 $0.32 $0.17 $0.95 Diluted $0.03 $0.32 $0.17
$0.93 Net Income (loss) available to Common Stockholders per
share: Basic $(0.51 ) $(0.03 ) $(1.64 ) $1.11 Diluted $(0.51 )
$(0.03 ) $(1.64 ) $1.07 Weighted average number of
shares outstanding: Basic 84,840,171 74,365,259 80,777,805
69,099,689 Diluted 84,840,171 74,365,259 80,777,805 81,724,651
Dividend declared per share of Common Stock $- $0.31 $-
$0.92
NET INCOME (LOSS) AVAILABLE TO
COMMON STOCKHOLDERS PER SHARE *
(in thousands, except share and
per share data)
For the Three Months For the nine Months Ended
September 30, Ended September 30, 2009** 2008 2009**
2008 Numerator: Numerator for basic earnings
per share $(43,450 ) $(2,132 ) $(132,508 ) $76,876 Interest expense
on convertible senior notes - - - 7,066
Dividends on Series E convertible
preferred stock
- - - 3,343 Numerator for
diluted earnings per share $(43,450 ) $(2,312 )
$(132,508 ) $87,285 Denominator: Denominator for
basic earnings per share— weighted average common shares
outstanding 84,840,171 74,365,259 80,777,805 69,099,689 Assumed
conversion of convertible senior notes - - - 7,416,680 Assumed
conversion of Series E convertible preferred stock - - - 4,952,748
Dilutive effect of stock based incentive fee - -
- 255,534 Denominator for diluted
earnings per share—weighted average common shares outstanding and
common stock equivalents outstanding 84,840,171
74,365,259 80,777,805 81,724,651
Basic net income (loss) per weighted average common share:
$(0.51 ) $(0.03 ) $(1.64 ) $1.11
Diluted net income (loss) per weighted average common share and
common share equivalents: $(0.51 ) $(0.03 ) $(1.64 )
$1.07 * Convertible senior notes and Series E-1 and
Series E-2 convertible preferred stock were anti-dilutive for 2009.
** The Company elected not to declare any of the specified
dividends on its three series of preferred stock during 2009. For
the three and nine months ended September 30, 2009, $4,656 and
$12,206 of preferred dividends were in arrears. These dividends in
arrears are included as part of dividends on preferred stock on the
consolidated statements of operations since they represent a claim
on earnings superior to common stockholders. These dividends in
arrears have not been accrued as dividends payable since they have
not been declared.
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