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Rubicon Associates is headed by a Chartered Financial Analyst with over 20 years of experience in the investment management industry focused on the analysis, investment and management of fixed income and preferred stock portfolios. Over the years, he has analyzed and invested in both public and... More
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  • Apollo Buys Stake In Schorsch's RCAP

    A positive step forward for RCAP, should help restore credibility and help the company simplify and clean house in order to move forward. A great deal for Apollo as well. Potential ramifications for other affiliates such as GNL (managed by AR Capital).

    Release here

    Summary:

    • Announces Agreement to Sell Wholesale Distribution Division to Affiliates of Apollo Global Management for $25 Million
    • Apollo to Invest $25 Million and Luxor Capital Partners to Invest Additional $12.5 Million in Convertible Preferred Stock
    • Business Re-Focused on Cetera Financial Group, the Company's Core Market Leading Retail Advice Platform
    • Cetera Financial Group to Enter Into Strategic Relationship with Apollo
    • Marc Rowan, Apollo's Co-Founder, and Anthony Civale, Lead Partner & Chief Operating Officer of Apollo Credit, to Join RCS Capital's Board of Directors
    • RCS Capital Management, LLC Services Agreement to be Terminated, Simplifying Governance Structure
    • Initiates Chief Executive Officer and Chief Financial Officer Searches for RCS Capital; Michael Weil and Brian D. Jones to Continue in Respective Roles Until Searches Are Concluded
    • Board of Directors to Form a Committee to Explore Further Options to Strengthen Retail Advice Business and Enhance Shareholder Value

    (emphasis mine)

    Consistent with the Board of Directors' and management's previously stated commitment to enhance shareholder value, the Company has entered into an agreement with an affiliate of Apollo Global Management, LLC (NYSE:APO) (together with its consolidated subsidiaries, "Apollo"), a leading global alternative investment manager, to sell RCS Capital's Wholesale Distribution division and certain related entities, for $25 million in cash. The Company expects to utilize the net cash proceeds from the sale to reduce its outstanding senior secured indebtedness.

    Further, Cetera Financial Group will also enter into a strategic relationship with Apollo to offer alternative Apollo-sponsored investment products through Cetera's open architecture network of independent financial advisors. Apollo currently manages more than $160 billion of assets across a broad spectrum of asset classes, geographies and strategies, many of which we expect will be attractive to retail investors seeking current income and increasing allocations to alternatives within their portfolios.

    In addition, the Company announced that Apollo and affiliates of Luxor Capital Group ("Luxor") have agreed to invest $37.5 million ($25 million from Apollo and $12.5 million from Luxor) in the Company through newly issued preferred stock. The Company intends to use the proceeds from this strategic investment to provide additional liquidity and working capital to allow the Company to continue to capitalize on the attractive market environment.

    In conjunction with the Apollo investment, Apollo will appoint two members to the RCS Capital Board of Directors, including Marc Rowan, Co-Founder of Apollo, and Anthony Civale, Lead Partner & Chief Operating Officer of Apollo Credit. In addition, Brian D. Jones has stepped down from the Board.

    The various Apollo transactions, which were unanimously approved by RCS Capital's Board of Directors, are subject to customary closing conditions and regulatory approvals.

    In conjunction with this transaction, RCS Capital and RCS Capital Management, LLC have agreed to terminate the external management services agreement, which will simplify the Company's governance structure. RCS Capital will issue an aggregate of 3.0 million shares of Class A common stock to Luxor and 2.6 million shares of Class A common stock to the other members of RCS Capital Management in connection with the termination.

    The Company also announced today that it has initiated a search for a new Chief Executive Officer and Chief Financial Officer. Both CEO Michael Weil and CFO Brian D. Jones will remain in their respective roles until successors have been appointed. Subsequently, Mr. Jones will have his full focus on building a leading investment bank and the premier advisory and capital markets platform in the independent broker dealer space. The investment bank business will continue to leverage its outstanding real estate investment trust advisory track record, as well as grow and diversify by focusing on underwriting and syndicating income-oriented securities for leading public and private issuers. The RCS Capital Board has agreed to retain a leading executive search firm to assist with the process of identifying and evaluating the CEO and CFO candidates from both internal and external sources. The Board expects to be able to attract executive management talent who will help set the future strategic vision of the independent retail advice business.

    The Board will also form a committee to explore further options to strengthen the core retail advice business and enhance value for shareholders.

    Management Commentary

    "The series of initiatives and transactions announced today are intended to re-focus the Company on its core retail advice platform, Cetera Financial Group, a leader in the independent broker dealer channel with attractive growth opportunities," said Mark Auerbach, Non-Executive Chairman of the Board of Directors. "We believe these actions will enhance liquidity, improve transparency and corporate governance, and will allow the Company to maximize value for all stakeholders. On behalf of the Board, I would like to thank Brian for his service on the Board and welcome Marc and Anthony from Apollo, who will add considerable insight and experience to the Company."

    Michael Weil, Chief Executive Officer of RCS Capital, said, "Over the last 18 months, we have expanded our retail investor platform by acquiring established, quality independent broker-dealers. We are confident that we are well-positioned to capitalize on the powerful demographic changes that are transforming the retail advice industry, and are thrilled that leading global institutional investors of Apollo's and Luxor's caliber see the significant growth opportunities in our retail platform. We are taking deliberate steps to address industrywide trends and company-specific opportunities to achieve a valuation that is reflective of the underlying strength and earnings power of our platform. We will further strengthen our position by implementing significant general and administrative cost reductions across the business while maintaining our focus on driving profitable growth."

    R. Lawrence "Larry" Roth, Chief Executive Officer of Cetera Financial Group, said, "The investment by Apollo is recognition of our growth potential and the underlying strength of our independent retail advice platform. We are excited to have Apollo as a strategic partner within our open architecture platform, and look forward to providing our more than 9,500 financial advisors and the over two million retail clients they serve with the potential to access Apollo's institutional quality investment solutions. When the sale of the Wholesale division is complete, RCS Capital will be more focused, simplified and better positioned to continue providing outstanding service to our advisors and their retail clients throughout the country."

    Marc Rowan of Apollo observed, "As a leading provider of independent retail advisory services, we believe that RCS Capital has unique advantages enabling it to service a growing and dynamic retail investment market. Demand among retail investors for high-quality, diversified financial offerings combined with personalized and trusted services is growing significantly. The client focused independent advice and leading investment offerings provided by Cetera's network of independent financial advisors are helping to address this need."

    Wholesale Division Transaction Details

    The Company is selling the Wholesale Distribution business and related activities, including its transfer agent, American National Stock Transfer, to an affiliate of Apollo for $25 million in cash, subject to adjustment. The Company will use net proceeds from the sale to reduce outstanding indebtedness.

    In a separate transaction, Apollo has agreed to acquire a majority interest in a new company, AR Global Investments, that will own substantially all of the ongoing asset management business of AR Capital.

    The Wholesale Division will operate as a stand-alone entity within AR Global Investments. The current Wholesale Division management team, led by Bill Dwyer, Chief Executive Officer of Realty Capital Securities, will continue to operate the day-to-day functions of the business.

    The Wholesale Division will be reported as a discontinued operation in RCS Capital's consolidated financial statements starting with the third quarter results in accordance with GAAP. The Company expects to complete the sale in 2015.

    Preferred Equity Investment Details

    The Company has agreed to issue $37.5 million of new convertible preferred stock with net proceeds to be used for general corporate and working capital purposes. The convertible preferred stock will have an initial liquidation preference of $25.00 per share and pay dividends in cash of 11% per annum (or 12.5% if paid in kind). The new preferred stock will be convertible into the Company's Class A common shares at any time starting twenty four months following issuance. The convertible preferred stock will have a conversion price of $5.00, and will be redeemable at the option of either the holders or the Company, on December 12, 2022.

    Tags: GNL, APO, RCAP, reit
    Aug 06 2:35 PM | Link | Comment!
  • Alpha Natural Filing

    Alpha's (NYSE:ANR) (ANRZ) bankruptcy petition can be found here. Always good information in these filings.

    Tags: ANR, ANRZQ
    Aug 03 11:06 AM | Link | Comment!
  • Rubicon's REIT Roundup

    July 24 edition of R3 - Rubicon's REIT Roundup.

    Tough week for REITs, with most down over 1%, with the exception of the datacenter and self-storage sectors.

    • Hotel's got pounded, with many down 5% or so after Pebblebrook guided lower on RevPar. BEE popped due to the hiring of a bank to put the REIT on the block.
    • Mack-Cali popped as it tightened and raised guidance and reiterated that some of their core markets are finding their legs. This has been a surprise to me, CLI has been dead money for so long, despite Corvex being involved.
    • Speaking of Corvex, some comments on ARCP from the activist as well as announcing a move to the NYSE and a name change helped the name, but it was still down 1%. One Liberty (NYSE:OLP) got whacked and the yield is now up over 7% - trying to catch Lexington.
    • Industrials got hit (STAG got downgraded btw) and two of my favorites - REXR and TRNO - were down over 3%.
    • Apartments continued to outperform - when will this end with cap rates so low and valuations so high? - with Post and AIMCO leading and Independence lagging.
    • I am not overly optimistic about the near-term outlook for REITs and think that if positions are to be taken, they should be legged into.

    Added recently are leverage metrics for the equity REITs, I will be adding a Debt/Equity for mREITs soon.

    If anyone knows a way to post a spreadsheet somewhere, I will post the spreadsheet as it might be easier to use.

    (click to enlarge)

    Tags: REIT, income
    Jul 25 12:24 AM | Link | 4 Comments
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