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Patrick Harden  

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  • 3 Ways For Prospect Capital To Create Value For Shareholders, Instantly [View article]
    I don't normally read much of the Fool any more, but that article summed up the situation nicely, particularly Wathen's conclusion - "I see this rights offering as a way for Prospect Capital to dump its CLOs at an above-market price to its existing shareholders, create desperately needed liquidity at Prospect Capital Corporation, and generate more fee-earning assets for its external manager, which is seemingly the only beneficiary of a rights offering vs. a true spinoff."
    Apr 16, 2015. 05:06 PM | 2 Likes Like |Link to Comment
  • 3 Ways For Prospect Capital To Create Value For Shareholders, Instantly [View article]
    Honestly, I think the best thing PSEC could do to create value is sell the company to someone with credible management. Or liquidate. That last earnings call was pretty much the last straw for me with them.

    I still own a small position just because I haven't needed the tax losses yet this year and at this point, I'm just hate-owning the stock.
    Apr 15, 2015. 12:15 PM | 5 Likes Like |Link to Comment
  • More on the Annaly downgrade: A lose-lose situation [View news story]
    Annaly is running with pretty low leverage at the moment - somewhere on the order of 5.5x. Taking leverage up into the 6s could mitigate some of the spread narrowing. Not much can be done about prepayments, but haven't most people who could refinance already done so?

    Would really like to see Annaly buyout Chimera and fold in some non-agency RMBS to the portfolio for additional yield and diversification.
    Apr 8, 2015. 03:25 PM | 7 Likes Like |Link to Comment
  • American Capital Mortgage hit with downgrade after dividend cut [View news story]
    The dividend cut should have been anticipated by everyone after these comments from Gary Kain on the fourth quarter earnings call: "We maintained our $0.65 dividend in Q4 against the backdrop of $0.51 of taxable income in the quarter.
    As such, the remaining $0.14 per share of our dividend essentially came from undistributed taxable income, which was in essence income earned in prior periods. Given today’s market conditions and our current portfolio positioning, we don’t expect to see a near term increase in taxable or GAAP earnings. These are important factors both management and the board will consider with respect to future dividends."
    Mar 20, 2015. 10:09 AM | 2 Likes Like |Link to Comment
  • Prospect Capital's (PSEC) CEO John Barry on Q2 2015 Results - Earnings Call Transcript [View article]
    Wow. Reading this was uncomfortable enough. I can only imagine how it sounded on the call. Jon Bock makes a good point though. I hope PSEC can deliver on this magical spinoff plan of theirs.
    Feb 5, 2015. 08:42 PM | 5 Likes Like |Link to Comment
  • Wells Fargo pulls the plug on mortgage REITs [View news story]
    I think Wells is essentially correct in that the flattening of the yield curve is a major headwind for the mortgage REITs. However, I would think that the mREITs would respond to the falling long end of the curve by selling appreciated long-dated fixed agency MBS and using the proceeds to repurchase stock. That would be my tactic.
    Jan 12, 2015. 10:15 AM | 4 Likes Like |Link to Comment
  • The Fed Has Ended QE, Should We Dump Annaly? [View article]
    The Fed will continue to have an effect on the agency MBS market for some time still:

    "The FOMC also directed the Desk to maintain the existing policy of reinvesting principal payments from the Federal Reserve’s holdings of agency debt and agency MBS in agency MBS and of rolling over maturing Treasury securities at auction...Reinvestments in agency MBS will continue to be concentrated in newly-issued agency MBS in the To-Be-Announced (TBA) market."

    Where I think Annaly differs from its peers is that Annaly is not availing itself of the financing advantage available on TBA pools. That financing advantage will continue as long as the Fed reinvests runoff into TBA pools. Annaly prefers to buy specific pools that provide prepayment protection. I disagree with this approach, as I believe we will experience a gradual increase in long-term rates that will naturally dampen prepayment speeds in 2015, making TBA pools more attractive to specific pools.

    If I were selecting an agency mortgage REIT for my portfolio, given my views, I'd pick AGNC over NLY.
    Oct 30, 2014. 01:28 PM | 1 Like Like |Link to Comment
  • Prospect Capital: What Comes Next? Part 4 [View article]
    I noticed this sentence buried in the Business section of the 10-K: "On June 26, 2014, we received a private letter ruling from the Internal Revenue Service (the "IRS") permitting us to pay up to 80% of our required dividends in stock for the tax years ending August 31, 2014 and August 31, 2015. Any dividends paid in stock will be taxable to the shareholder as if the dividend had been paid in cash and we will receive a dividend paid deduction for such distribution."

    I think Prospect's inability to access the capital markets, coupled with the increase in non-cash taxable income from the consolidation of certain blocker companies, is straining their liquidity. I wouldn't be surprised if they decide to pay out some of calendar year 2015 dividends in stock.
    Aug 26, 2014. 10:18 AM | 9 Likes Like |Link to Comment
  • GSV Capital Remains Undervalued With Shares At 50% Of NAV And Upcoming Catalysts [View article]
    I think an additional near-term catalyst for GSV Capital could be if the Company receives an exemption from the SEC that would allow it to meet the diversification requirements to be categorized as a Regulated Investment Company (NYSEMKT:RIC) for tax purposes. GSV is seeking to achieve RIC status for the tax year ended December 31, 2013, so the Company needs the issue resolved by the time the 2013 tax return is due in mid-September 2014.

    Qualifying as a RIC for tax purposes will enable GSV to immediately reverse its existing deferred tax liability, adding ~$0.40/share to NAV. Furthermore, it will allow GSV to begin making tax-efficient capital gains distributions to its shareholders. GSV would like to achieve RIC status before it sells its Twitter shares to keep from being taxed as a C-Corp on those gains.
    Aug 12, 2014. 12:54 PM | 3 Likes Like |Link to Comment
  • Annaly Capital: The Road To Higher Dividends Begins Now [View article]
    Most of the difference is that gains and losses on the mortgage-backed securities directly impact shareholders' equity without going through the income statement, whereas the hedges are treated as derivatives and the gains and losses on these instruments does go through the income statement. Economically, they should offset each other - when the MBS become more valuable, the hedges lose value. In that case, the loss on the hedges will create a GAAP loss, but the overall book value should nevertheless increase. When the MBS lose value, the hedges become more valuable. The gain on the hedges produces GAAP income, but the overall book value will decrease.
    Aug 8, 2014. 05:28 PM | 1 Like Like |Link to Comment
  • Annaly Capital: The Road To Higher Dividends Begins Now [View article]
    I don't think Annaly can materially increase dividends without boosting leverage. There really aren't any more levers for them to pull now that they ditched the short-term hedges (unless they wanted to exploit what's left of the dollar roll game next quarter).
    Aug 8, 2014. 05:25 PM | 1 Like Like |Link to Comment
  • GSV reports $14.86/share NAV, in no rush to sell Twitter shares [View news story]
    They're also in no rush to sell Twitter shares because they can't yet distribute the gains in a tax-efficient manner. Even though they are a BDC, they are still a C-corp for tax purposes, not a RIC like most BDCs.
    Aug 8, 2014. 01:13 PM | 1 Like Like |Link to Comment
  • A Diversification Dissertation For Income Investors [View article]
    I think for many income investors, the challenge to diversification is finding equities outside the Big 3 sectors (REITs, BDCs, and MLPs) that yield greater than 7%. Bonds and preferreds are also options, but REITs and bonds are often highly correlated (particularly mortgage REITs, which are basically closed-end levered bond funds).
    Jul 30, 2014. 04:47 PM | Likes Like |Link to Comment
  • American Capital +1.3% after reporting a big Q2 [View news story]
    AGNC is wisely taking advantage of the capital gains tax treatment for tax purposes to use up an otherwise worthless net capital loss carryforward. AGNC may (and I think it will) continue distributing at the current level of $0.65/share for the rest of 2014. The earnings release noted that a portion of 2014 dividends are likely to be characterized as a return of capital.
    Jul 28, 2014. 10:18 PM | Likes Like |Link to Comment
  • Manhattan Bridge jumps on offering postponement [View news story]
    They still have to complete the offering eventually or they won't be able to make a REIT election. Not to mention they need the capital.
    Jul 25, 2014. 10:29 AM | Likes Like |Link to Comment