EDISON, N.J., Nov. 14 /PRNewswire-FirstCall/ -- Hanover Capital
Mortgage Holdings, Inc. (NYSE Alternext: HCM) (the "Company" or
"HCM") reported a gain for the quarter ended September 30, 2008 of
$34.0 million, or $3.94 per share on a fully-diluted basis,
compared to a net loss of $(31.7) million, or $(3.83) per share on
a fully diluted basis, for the same period of 2007. This difference
is primarily due to the gain realized on the surrender of HCM's
subordinate mortgage-backed securities ("Subordinate MBS")
portfolio in settlement of its repurchase agreement ("Repurchase
Agreement") obligation with RCG PB, Ltd., an affiliate of Ramius
Capital Group, LLC ("Ramius") in August 2008. The gain of $40.9
million represents the amount of repurchase obligation retired over
the carry value of the portfolio surrendered. There was no
significant loss taken on mark to market of the Subordinate MBS
portfolio, during the three months ended September 30, 2008, as
occurred during the same period in 2007. For the nine months ended
September 30, 2008, HCM reported a net loss of $(12.3) million
compared to net loss of $(42.3) million for the same period of
2007. This difference is primarily due to the gain realized on the
surrender of HCM's Subordinate MBS in settlement of the Repurchase
Agreement obligation in August 2008. The remainder is attributable
to the increase in HCM's general operating deficit for the nine
months ended September 30, 2008, due to reduced income and
increased operating expenses. Significant changes in HCM's
financial position as of September 30, 2008, from December 31,
2007, are primarily related to the surrender of the Subordinate MBS
portfolio to settle the repurchase obligation entered into in
August 2007, the reduction in the size of the Agency portfolio and
the debt related to the financing of those portfolio assets.
Excluding the gain of $40.9 million on the surrender of the
Subordinate MBS portfolio, HCM would have reported a net loss of
$(6.9) and $(53.2), respectively, for the three and nine months
ended September 30, 2008. HCM's consolidated financial statements
have been prepared on a going concern basis, which contemplates the
realization of assets and the discharge of liabilities in the
normal course of business for the foreseeable future. Due to
unprecedented turmoil in the mortgage and capital markets during
2007 and into 2008, HCM incurred a significant loss of liquidity
over a short period of time. HCM's current operations are not cash
flow positive. Additional sources of capital are required for HCM
to generate positive cash flows and continue operations beyond
2008. These events have raised substantial doubt about HCM's
ability to continue as a going concern. HCM deferred the interest
payments on its liabilities due to its two subsidiary trusts
issuing preferred and capital securities through the September 30,
2008 and October 30, 2008 interest payment dates. HCM has now
deferred interest payments for four consecutive quarters, as
allowed under each of these instruments, and can defer no more
interest payments. Under the terms of these instruments, the
Company will be required to pay all deferred interest on December
31, 2008 and January 31, 2009, respectively, of approximately $4.8
million in the aggregate, however, the Company does not anticipate
having sufficient funds to pay this obligation without an
additional source of capital or a restructure of the indebtedness.
In connection with the Company's contemplated merger, discussed
below, on September 30, 2008, the Company entered into an exchange
agreement, with each of the holders of the Company's outstanding
preferred securities to acquire (and subsequently cancel) all of
the Company's outstanding trust preferred securities for the
consideration provided for in the exchange agreements at the time
of the closing of the merger. Included in the exchange agreements
is an agreement by holders to forbear from making any claims
against the Company arising out of or in connection with the
various transaction agreements related to the trust preferred
securities (including any events of default), unless among other
things, the contemplated merger does not occur. On September 30,
2008, HCM entered into an Agreement and Plan of Merger, which was
amended and restated on October 28, 2008 (as amended and restated,
the "Merger Agreement") with Walter Industries, Inc. ("Walter") a
Delaware limited liability company, and JWH Holding Company, LLC
("Spinco"), a Delaware limited liability company that is a direct,
wholly-owned subsidiary of Walter. HCM's Board of Directors
unanimously approved the merger, on the terms and conditions set
forth in the Merger Agreement. The Merger Agreement provides that
in connection with the merger Spinco will merge with and into HCM,
with HCM being the surviving corporation and renamed "Walter
Investment Management Corporation." The merger is expected to be
completed in early 2009. Pursuant to the Merger Agreement and
subject to certain adjustments, the surviving corporation will
issue an amount of shares such that Walter stockholders will
collectively own approximately 98.5%, and HCM's stockholders will
collectively own approximately 1.5%, of the shares of common stock
of the surviving corporation outstanding or reserved for issuance
in settlement of restricted stock units of the surviving
corporation. In the merger, every 50 shares of HCM common stock
outstanding immediately prior to the effective time of the merger
will be combined into one share of the surviving corporation common
stock. Upon the completion of the merger, each outstanding option
to acquire shares of HCM common stock and each other outstanding
incentive award denominated in or related to its common stock,
whether or not exercisable, will be converted into an option to
acquire shares of or an incentive award denominated in or related
to the surviving corporation's common stock, in each case
appropriately adjusted to reflect the exchange ratio and will, as a
result of the merger, become vested or exercisable. John A.
Burchett, the Company's President and CEO, commented, "We are
pleased that our contemplated merger with JWH Holding Company, LLC,
a wholly-owned Walter subsidiary, is moving forward as planned. We
have, on September 30, 2008 entered into the Merger Agreement, as
amended on October 28, 2008, and on November 5, 2008, filed our
Form S-4 Registration Statement which has not yet become effective
with the SEC. In the interim, we continue to focus on generating
fee income through our wholly-owned operating subsidiary Hanover
Capital Partners 2, Ltd. by rendering valuations, loan sale
advisory, and other related services to private companies and
government agencies." HCM will host an investor conference call on
Monday, November 17, 2008 at 11:00 AM ET. The call will be
broadcast on the Internet at http://www.investorcalendar.com/. To
listen to the call, please go to the Web site at least fifteen
minutes prior to the call to register, download, and install any
necessary audio software. For those not able to listen to the live
broadcast, a replay will be available for a period of 30 days. To
access the live call by phone, dial 877-407-8035 (international
callers dial 201-689-8035) several minutes before the call. A
recorded replay may be heard through Thursday, November 20th at
11:59 pm ET by dialing 877-660-6853 (international callers dial
201-612-7415) and using playback account #286 and conference ID #
302927. Hanover Capital Mortgage Holdings, Inc. is a mortgage REIT
staffed by seasoned mortgage capital markets professionals. HCM
invests in prime mortgage loans and mortgage securities backed by
prime mortgage loans. For further information, visit HCM's Web site
at http://www.hanovercapitalholdings.com/. Certain statements in
this press release may constitute "forward-looking" statements with
the meaning of the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995. Statements that are not historical
fact are forward-looking statements. Such forward-looking
statements involve known and unknown risks, uncertainties and other
important factors that could cause the actual results, performance
or achievements, to differ materially from expectations. The
forward-looking statements are based on HCM's current belief,
intentions and expectations. These statements are not guarantees or
indicative of future performance. Important assumptions and other
important factors that could cause actual results to differ
materially from those forward-looking statements include, but are
not limited to, those factors, risks and uncertainties that are
described in Item 1A of HCM's Annual Report on Form 10-K for the
year ended December 31, 2007 and in other securities filings by
HCM. HCM's future financial condition and results of operations, as
well as any forward-looking statements, are subject to change and
inherent risks and uncertainties. The forward-looking statements
contained in this press release are made only as of the date hereof
and HCM undertakes no obligation to update or revise the
information contained in this announcement whether as a result of
new information, subsequent events or circumstances or otherwise,
unless otherwise required by law. HCM's Registration Statement on
Form S-4 has not yet become effective. The securities being
registered thereunder may not be sold nor may offers to buy be
accepted prior to the time the registration statement becomes
effective. This news release shall not constitute an offer to sell
or the solicitation of an offer to buy, nor shall there be any sale
of these securities in any state in which such offer, solicitation
or sale would be unlawful prior to registration or qualification
under the securities laws of any such state. No offering of
securities shall be made except by means of a prospectus meeting
the requirements of Section 10 of the Securities Act of 1933, as
amended. Additional Information and Where to Find It This
communication is being made in respect of the proposed merger
transaction involving JWH Holding Company and Hanover. In
connection with the proposed merger and certain related
transactions, Hanover filed a registration statement on Form S-4
containing a preliminary proxy statement/prospectus with the SEC,
and Hanover will be filing other documents regarding the proposed
transaction with the SEC as well. BEFORE MAKING ANY VOTING OR
INVESTMENT DECISION, INVESTORS ARE URGED TO READ THE FINAL PROXY
STATEMENT/PROSPECTUS REGARDING THE PROPOSED TRANSACTION AND ANY
OTHER RELEVANT DOCUMENTS CAREFULLY IN THEIR ENTIRETY WHEN THEY
BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION
ABOUT THE PROPOSED TRANSACTION. The final proxy
statement/prospectus will be mailed to stockholders of Hanover and
Walter Industries. Stockholders will be able to obtain a free copy
of the proxy statement/prospectus, as well as other filings
containing information about Hanover and Walter Industries, without
charge, at the SEC's Internet site (http://www.sec.gov/). Copies of
the proxy statement/prospectus and the filings with the SEC that
will be incorporated by reference in the proxy statement/prospectus
can also be obtained, without charge, at Hanover's Web site
(http://www.hanovercapitalholdings.com/). Hanover and Walter
Industries and their respective directors and executive officers
and other persons may be deemed to be participants in the
solicitation of proxies in respect of the proposed merger and
related transactions. Information regarding Hanover's directors and
executive officers is available in Hanover's proxy statement for
its 2008 annual meeting of stockholders and Hanover's 2007 Annual
Report on Form 10-K, which were filed with the SEC on April 24,
2008, and April 2, 2008, respectively, and information regarding
Walter Industries' directors and executive officers is available in
Walter Industries' proxy statement for its 2008 annual meeting of
stockholders and Walter Industries' 2007 Annual Report on Form
10-K, which were filed with the SEC on March 19, 2008, and March 7,
2008, respectively.. Other information regarding the participants
in the proxy solicitation and a description of their direct and
indirect interests, by security holdings or otherwise, is contained
in Hanover's proxy statement/prospectus and other materials
referred to in Hanover's proxy statement/prospectus. - charts
follow - HANOVER CAPITAL MORTGAGE HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (in thousands, except share and per
share data) September 30, 2008 December 31, (Unaudited) 2007
----------- ---- Assets Cash and cash equivalents $642 $7,257
Accrued interest receivable 82 1,241 Mortgage Loans Collateral for
CMOs 5,085 6,182 Mortgage Securities Trading ($1,092 and $30,045,
pledged respectively, at period ended) 5,274 30,045 Available for
sale (all pledged under a single Repurchase Agreement) - 82,695
Other subordinate security, available for sale 1,541 1,477 Equity
investments in unconsolidated affiliates 175 1,509 Other assets
1,440 4,782 ----- ----- $14,239 $135,188 ======= ========
Liabilities Repurchase Agreements (secured with Mortgage
Securities) $- $108,854 Note Payable (collateralized with Mortgage
Securities classified as trading) 1,100 - Collateralized mortgage
obligations (CMOs) 3,143 4,035 Accounts payable, accrued expenses
and other liabilities 2,059 5,954 Obligation assumed under
assignment of lease in default by subtenant 993 - Deferred interest
payable on liability to subsidiary trusts 3,606 755 Liability to
subsidiary trusts issuing preferred and capital securities 41,239
41,239 ------ ------ 52,140 160,837 ------ ------- Commitments and
Contingencies - - Stockholders' Equity (Deficit) Preferred stock,
$0.01 par value, 10 million shares authorized, no shares issued and
outstanding - - Common stock, $0.01 par value, 90 million shares
authorized, 8,654,562 and 8,658,562 shares issued and outstanding
as of September 30, 2008 and December 31, 2007, respectively 86 86
Additional paid-in capital 102,970 102,939 Cumulative earnings
(deficit) (83,572) (71,289) Cumulative distributions (57,385)
(57,385) ------- ------- (37,901) (25,649) ------- ------- $14,239
$135,188 ======= ======== HANOVER CAPITAL MORTGAGE HOLDINGS, INC.
AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (in
thousands, except share and per share data) (Unaudited) Three
Months Ended Nine Months Ended September 30, September 30,
------------- ------------- 2008 2007 2008 2007 ---- ---- ---- ----
Revenues Interest income $1,565 $6,194 $10,334 $19,314 Interest
expense 2,861 5,246 14,096 12,853 ------ ------- ------- -------
(1,296) 948 (3,762) 6,461 Loan loss provision - - - - ------
------- ------- ------- Net interest income (1,296) 948 (3,762)
6,461 Net gain realized on surrender of Subordinate MBS 40,929 -
40,929 - Gain (loss) on sale of mortgage assets (19) (997) 460
(803) Loss on mark to market of mortgage assets (6) (28,701)
(40,543) (43,325) Gain (loss) on freestanding derivatives - (633)
(98) 1,668 Technology 67 230 325 946 Loan brokering and advisory
services 13 - 35 157 Other income (loss) 65 (273) 1,691 (381)
------ ------- ------- ------- Total revenues 39,753 (29,426) (963)
(35,277) ------ ------- ------- ------- Expenses Personnel 957 869
3,140 2,998 Legal and professional 1,021 410 1,814 1,368 Impairment
of investments in unconsolidated affiliates 1,064 - 1,064 - Lease
obligation assumed from defaulting subtenant 993 - 993 - General
and administrative 715 256 1,069 1,276 Depreciation and
amortization 608 154 1,028 461 Occupancy 82 80 248 233 Technology
11 104 148 413 Financing - 256 896 558 Insurance and other 305 195
1,005 493 ------ ------- ------- ------- Total expenses 5,756 2,324
11,405 7,800 ------ ------- ------- ------- Operating income (loss)
33,997 (31,750) (12,368) (43,077) Equity in income of
unconsolidated affiliates 29 27 85 82 ------ ------- -------
------- Income (loss) from continuing operations before income tax
provision 34,026 (31,723) (12,283) (42,995) Income tax provision -
- - - ------ ------- ------- ------- Income (loss) from continuing
operations 34,026 (31,723) (12,283) (42,995) ------ ------- -------
------- Discontinued Operations Income (loss) from discontinued
operations before gain on sale and income tax provision - 5 - (623)
Gain on sale of discontinued operations - - - 1,346 Income tax
provision from discontinued operations - - - - ------ -------
------- ------- Income from discontinued operations - 5 - 723
------ ------- ------- ------- Net Income (loss) $34,026 $(31,718)
$(12,283) $(42,272) ======= ======== ======== ======== Net income
(loss) per common share - Basic Income (loss) from continuing
operations $3.94 $(3.83) $(1.42) $(5.28) Income from discontinued
operations 0.00 0.00 0.00 0.09 ------ ------- ------- ------- Net
income (loss) per common share - Basic $3.94 $(3.83) $(1.42)
$(5.19) ======= ======= ======= ======= Net income (loss) per
common share - Diluted Income (loss) from continuing operations
$3.94 $(3.83) $(1.42) $(5.28) Income from discontinued operations
0.00 0.00 0.00 0.09 ------ ------- ------- ------- Net income
(loss) per common share - Diluted $3.94 $(3.83) $(1.42) $(5.19)
======= ======= ======= ======= Weighted average shares outstanding
- Basic 8,635,988 8,283,536 8,633,759 8,142,470 Weighted average
shares outstanding - Diluted 8,635,988 8,283,536 8,633,759
8,142,470 DATASOURCE: Hanover Capital Mortgage Holdings, Inc
CONTACT: John Burchett, CEO, Irma Tavares, COO, or Harold McElraft,
CFO, Hanover Capital Mortgage Holdings, Inc., +1-732-593-1044 Web
Site: http://www.hanovercapitalholdings.com/
Copyright