I know, you think this is the annual call for donations.
Come to think of it, Justice for Children could certainly use your help, and I can’t think of anyone more deserving than a child forced by our peculiar legal system to continue to live with their attackers.
But I’m really talking about my potential to give back to the market the sudden trading profits it handed me since last Friday morning. In other words, this is my crazy trade for the day.
I took those trading profits and put them into today’s bloodbath. Either that money will become a tribute to the market gods, or it will turn into even more money so I can spend it on floozies and high living, and waste the rest.
Anthracite Capital (AHR) formally defaulted on $79.25 million in debt today. They told us a month ago that this would happen, but the market seems surprised that they did not pay the debt during the 30-day “curing” period.
At the front of the line is Deutsche Bank, with $68 million in repo financing outstanding, and collateral pledged against that debt. Anthracite and its management (Blackrock) expect that to happen, and then we can expect that Deutsche will not be trying too hard to sell the collateral at top dollar.
Having said that, I was intrigued by the Q3 filing AHR made with the SEC that listed a common equity book value of $3.69 per share. On 93 million shares, that’s some real money that would be theoretically left over after satisfying all debt and preferred stock at face value.
So why would I think that the $3.69 might be somewhere in the realm of reality?
Before I go further, let me say again for the record:
THIS IS PURE SPECULATION
Do not risk the grocery money on this !!!!
Having given the warning, here’s my thinking:
Blackrock has made a major business of evaluating structured bonds.That business brings in tens of millions in profit for them each year, and the most wonderful opportunities a consulting firm ever had — no-bid contracts entered by a distressed counterparty under extreme time pressure.
In case you forgot, they have the contract to evaluate the JP Morgan holdings of Bear Stearns bonds that the Fed provided $29 billion in financing for during that shotgun wedding, and other contracts like it.
Anyway, looking at the “book value” of AHR at $3.69 per share of common as of Sep 30, my thinking is that the entire capitalization of AHR is less than the yearly profit at Blackrock Solutions, so the only thing they really don’t want is a situation that calls their valuations into question — like liquidation of AHR for zero dollars to the common shareholders would do.
So I’m thinking that even a fire sale might well pay out fifty cents or a dollar or more per share.
For now, they will “poor mouth” every announcement, in order to frighten debt and pref holders into taking deeply discounted payoffs, so don’t expect any encouragement at all from the company if you buy into this stuff. On the other hand, with a face amount of $25 and a trading price well under a buck, that pref might be pretty sweet if they were to make a ten cent on the dollar offer…..
Let me repeat so you know for sure you’ll need a strong stomach:
They will now do everything they can to terrify their debt holders. As a common or preferred stock holder, you should be fully prepared to hear from the company that you will never see a dime for your stock.
Good luck to us all, and do think about supporting Justice for Children.
I’ve known the founder of the organization for 30 years, and he has managed to organize the only charity I know of that speaks only for abused children. They operate on a virtual shoestring, handling whole cases beginning to end for a couple of hundred bucks. Every dollar makes a difference, and if you have a thousand of them to give, you could save up to 50 children’s lives right here in America.
Full disclosure: I’m on the Board of JFC.