Today - Thursday, December 12, 2013
3:43 PMAmTrust tumbles after GeoTeam takes aim
- "AmTrust's (AFSI -11.5%) financial position has never been stronger," says CEO Barry Zyskind, responding to The GeoTeam - in a Seeking Alpha article - suggesting the company is a house of cards.
- "The Company has addressed issues in its quarterly earnings calls and public filings that have been raised regarding its investment in life settlements, clarifying the accounting of the life settlement portfolio."
- SA contributor Brian Grosso - who just a few days ago called the stock a potential double with little downside - is shaken up enough by the GeoTeam essay to quickly exit his position (see the comment thread in the GeoTeam piece).
2:50 PMMerrill to pay $131.8M to settle SEC CDO claims
- Merrill Lynch (BAC +0.4%) settles with the SEC over allegedly faulty disclosures about collateral selection on two collateralized debt obligations, and for maintaining inaccurate books about a third CDO.
- According to the SEC, Merrill failed to inform those it sold the investments to that hedge fund Magnetar Capital helped select the collateral for the CDOs and then shorted them. How charming.
1:07 PMAIG reportedly in ILFC sale talks with AerCap
- Moving nicely ahead in a bright red market is AIG (AIG +2.2%) which is now in talks to sell ILFC to AerCap Holdings (AER +4%), according to a Bloomberg report. "We never comment on rumors," says AerCap CEO Aengus Kelly when reached by telephone.
- Based in the Netherlands, AerCap - a former holding of Cerberus Capital - is the largest independent aircraft lessor with $15B in assets, and - recently reporting a debt/equity ratio of 2.5x - said it could increase the load to 3.5x-4x "if extremely attractive opportunities are found."
- Of course, AIG's effort to sell ILFC to a Chinese consortium for about $4.2B isn't formally dead, but the insurer is free to pursue other sales avenues.
12:30 PMGoldman remains bullish on private MI operators
- "Management recognizes that no private mortgage insurer has sustained 25%+ market share for an extended period in the past," says Goldman's Eric Beardsley, reiterating his Buy on both Radian (RDN +1.1%) and MGIC Investment (MTG +0.6%) following presentations from both at this week's Goldman financial services conference.
- Previous coverage of Radian's presentation
- Transcript of MGIC's presentation
- Though the FHA's retreat from the mortgage insurance market should leave plenty of business for the private operators, there are a couple of well-capitalized new players - NMI Holdings (NMIH +2.5%) and Essent Group (ESNT +1%). Beardsley sees - but isn't worried by - Radian's market share falling from 27% to 24% over the next few years.
12:09 PMBAML: Investors should own Citi
- "At this mid-stage of recovery, investors should own the U.S.-based, globally exposed bank stock trading below tangible book that has plenty of capital and is also a 'self help' story," says BofA's Erika Najarian, attempting to distill the bull case on Citigroup (C -0.4%) down to one line.
- Citi's had a nice year - up 28% - but that's less than the 30% for the KBW Bank Index, and the shares trade at 0.9x tangible book value, 9.4x consensus 2014 EPS, and 8.5x 2015 estimates.
- The bank should have the biggest "incremental change" in capital returns this year, says Najarian, who expects no issues with Citi paying out $9B in dividends and share buybacks. She boosts her price target to $61 from $58.
11:26 AMMoody's threatens downgrade of Puerto Rico to junk
- BTIG's Mark Palmer attempts to put in perspective Moody's threatened downgrade of Puerto Rico's to junk status, saying S&P's decision will be of more importance to MBIA (MBI -1.1%) and Assured Guaranty (AGO +0.1%), and each would face a capital charge of $65M should a downgrade occur - peanuts in terms of their capital levels.
- As for Moody's, the agency says a downgrade could occur if Puerto Rico is unable to access capital markets - a concern raised this week when it repaid a $400M loan from Barclays from its own pocket rather than tapping the bond market. Palmer, however, notes Treasury Secretary Melba Acosta today saying the Commonwealth plans to return to the muni bond market in early 2014. Puerto Rico has the liquidity and financial flexibility to wait out the current turbulence in municipals, says Acosta.
11:10 AMGM exits Ally Financial
- General Motors (GM +0.7%) has sold its approximate 8.5% stake in Ally Financial for $900M reports Bloomberg, and expects to record a gain of $500M.
- The plan to sell Ally in a private placement had been reported last week, and the execution comes in the same week as the Treasury exited the rest of its position in the automaker.
- The government remains the majority owner of Ally - formerly GMAC - which no doubt has its own IPO plans ... timing to be determined.
10:29 AMCanadian life insurers draw Buy ratings| Comment!
9:06 AMNorthStar prices secondary at $11.65 each
- NorthStar Realty Finance (NRF) pulls off a whopper of a secondary, pricing 50M shares at $11.65 each, just 2.5% below yesterday's close.
- The offering, of course, came right on the heels of the plan to spin off the company's asset management business and a 20% jump in the stock yesterday.
- Shares -2.3% to $11.68 premarket
- Press release
9:02 AMMetLife boosts free cash flow outlook
- Speaking on the year-end investor call, CFO John Hele says MET expects FCF as a percent of operating earnings in 2015-2016 to be 45%-55%. Previously, management had estimated the ratio to be 35%-45% from 2014-2016 (2014 is expected to be 35%).
- Higher dividends from Met's subsidiaries is behind the boost. Behind that is the bull market in stocks, the impact from interest rate hedges, and the benefits from the "4-way merger" - the onshoring of an offshore reinsurance unit into three U.S. subsidiaries which are also being merged.
- Management is tight-lipped about its capital return plans. "We need more clarity (from D.C.) than we have today."
- Webcast and presentation slides
8:46 AMApollo Residential to get new CFO
- Teresa Covello will assume the CFO position on January 1 from Stuart Rothstein, who will retain his role on the investment committee of ARM Manager - AMTG's external manager. Rothstein is also CEO of Apollo Commercial Real Estate.
- Covello is currently Controller of ARM Manager. She previously served as an SVP at MFA Financial.
- Press release
8:06 AMKeyBanc bullish on apartment REITs, AVB and UDR in particular
- KeyBanc makes some moves in the apartment REIT sector, boosting AvalonBay (AVB) and UDR to Buy with price targets of $139 and $29, respectively. Essex Property Trust (ESS) loses its Buy rating.
- The sector as a whole is boosted to a Buy, "based upon attractive valuation levels that overlook the potential for accelerating fundamentals, as the impact of new supply wanes and continued employment gains support greater rental demand into '15," says analyst Karin Ford.
- "We are incrementally constructive on East Coast exposure; our upgrade of AVB is consistent with this notion ... Declining supply in UDR's markets should support fundamental outperformance for the Co.'s portfolio going forward."
- "While we continue to see West Coast fundamentals as favorable, we believe ESS largely prices that in, particularly following its bullish Investor Day, which highlighted a strong 3-yr. growth plan. Additionally, the potential acquisition of BRE could be an overhang for the stock."
7:58 AMWeyerhaeuser started a Buy at JPM; Rayonier a Sell
- JPMorgan's Phil Gresh takes a peek into the timber REIT industry, initiating Weyerhaeuser (WY) with a Buy and $37 price target and Rayonier (RYN) with a Sell and $48 price target.
- "We see WY as a unique demand/cost-takeout story in the timber REIT sector. On the demand side, WY should benefit from a steady improvement in domestic housing...and international log markets."
- On RYN: "Our primary concern is that potentially slowing demand, when combined with excess supply in a high-margin business, could lead to a multi-year pricing headwind."
7:51 AMVentas boosts dividend, lowers funding costs
- Ventas (VTR) boosts its quarterly dividend by 8% to $0.725 per share, payable on Dec. 31 to holders of record on Dec. 16. The annualized yield based on yesterday's close is 5.15%.
- "The dividend increase reflects our expectations for outstanding growth of 11 percent in 2013 normalized FFO per share," says CEO Debra Cafaro.
- In other news, subsidiary Ventas Realty Limited Partnership lowers its funding costs, closing on a $3B unsecured credit facility, including a $2B revolver priced at 100 bps over Libor. The rest are term loans priced at 105 bps over Libor.
- Proceeds were used to repay debt on the previous line which had been priced at 110 bps over Libor and term loans priced at 120-125 bps over Libor.
7:37 AMCapstead Mortgage holds dividend steady
- Capstead Mortgage (CMO) holds its quarterly dividend steady at $0.31 per share. This payout is to holders of record on Dec. 31 and payable on Jan. 20.
- Core earnings in Q3 were $0.23 per share and the yesterday's close of $11.99 puts the stock at a relatively lean (for the mREIT sector at the moment) 2.9% discount to September 30 book value.
- Press release