Today - Wednesday, December 11, 2013
5:43 PMReuters: Morgan Stanley launches sale of U.S. oil terminal business
- Morgan Stanley (MS) has launched a formal effort to sell its controlling stake in U.S. oil terminal and transport business TransMontaigne (TLP), Reuters reports, in what appears to be its first definitive step toward disassembling its vast energy trading group.
- The TransMontaigne MLP includes 48 fuel terminals with nearly 24M barrels of storage capacity on the Gulf coast, in Florida, the Midwest and across the Southeast, including along the strategically important Colonial Pipeline that ships gasoline and diesel from the Gulf to the East Coast.
- Stanley's trading division accounts for ~60% of the MLP's revenues due to long-term contracts to use its terminals, and some of these contracts could be sold as part of the package.
- A number of potential buyers including Qatar, a Chinese oil major and Russia's Rosneft have been rumored in the past year, but this report says likely potential buyers include MLP subsidiaries of major refiners or midstream companies.
4:22 PMMFA Financial cuts dividend by 9%
- MFA Financial cuts its quarterly dividend by $0.02 to $0.20 per share. It will be paid on Jan. 31 to shareholders of record on Dec. 31. Q3 core EPS was $0.18. The annualized yield is 11.2%.
- The board approves a 6M share increase to the buyback authorization. There are 850K shares left in the previous 4M share plan.
- Shares -0.4% AH
- Press release
4:16 PMGood timing: NorthStar launches secondary offering
- NorthStar Realty Finance (NRF) takes advantage of today's 20% moonshot in the stock, launching a 50M share secondary. Part of the proceeds will fund the cash portion of an approximately $400M portfolio of manufactured housing communities under contract. The rest will be for other potential investments.
- Shares -4.2% AH
- Press release
3:50 PMGoldman taking share in equity issuance
- "The most notable positives to us were permission to continue to trade sovereign bonds for proprietary purposes, permission to invest in non-covered entities such as wholly owned subsidiaries, joint ventures, and acquisition vehicles such as business development companies, and the ability to hedge risk related to individual as well as aggregated positions of the banking entity," opines Susquehanna's Doug Sipkin about the Volcker rule. He also notes the timeline - the rules become effective on April 1 and conformance starts on July 21, 2015.
- Goldman Sachs (GS -1.3%) and Morgan Stanley (MS -2.1%) are most impacted by the rule, says Sipkin, but Goldman - thanks to greater capital efficiency, wider bid-ask spreads, and best-in-breed status in IB - should be just fine.
- Sipkin expects Q4 results to begin showing this, helped by a "torrid" pace of equity issuance. Goldman's share of equity issues YTD is 11.8% vs. 8% a year ago. "The equity business in Q4 is likely seeing its best quarter since prior to the credit crisis."
- Previous: Mike Mayo says Morgan Stanley is more wealth manager than trading shop now, and should cruise through the Volcker rule.
3:38 PMPlenty of room for mortgage insurers to grow market share
- Much has been made of the FHA pulling back from the mortgage insurance market, leaving opportunity for the private MI providers like Radian (RDN -1.9%), MGIC Investment (MTG -3.2%), and Genworth (GNW -0.9%), along with newer entrants like Essent Group (ESNT -1.2%) and NMI Holdings (NMIH -1.8%).
- Presenting at the Goldman conference today, Radian reminds (slide 13 of presentation) private MI market share spent most of the pre-bust decade at 70%-80% before falling to just just 20% in 2009 and 2010. It's risen since, but only reached 51% in Q3. "And the FHA in fact continues to make statements about pulling back," says CEO Sanford Ibrahim.
- Conference transcript
3:08 PMBroad slide in equity REIT sector
- The equity REITs are particularly weak today as the 10-year Treasury yield heads higher by 4 basis points to 2.85%. Senior Housing (SNH -2.3%), Omega Healthcare (OHI -2.6%), American Realty Capital (ARCP -1.7%), Stag Industrial (STAG -2%), Equity Residential (EQR -1.4%).
- Retail and shopping center/mall REITs also have the weak retail traffic numbers to mull over: Realty Income (O -1.4%), National Retail (NNN -2.8%), Simon Property (SPG -1.4%), General Growth (GGP -2.6%), Kimco (KIM -2.6%), Brixmor (BRX -0.8%).
12:20 PMIcahn Enterprises tumbles for a 2nd day
- "If Carl Icahn is selling, do you want to be buying," asks Andrew Bary in Barron's. "Probably not." Icahn Enterprises (IEP -13.6%) extends yesterday's big post-secondary offering decline as Bary reminds the stock trades at a hefty premium to NAV of about $75 per unit.
- While it might be worth some premium to invest alongside Carl Icahn, says Bary, 80% is probably far too much (it's less since the article was published!).
- By contrast, you can invest with the Tisch family in Loews (L -1.3%) at a discount to NAV, and Berkshire Hathaway (BRK.A, BRK.B) trades at just 1.3x book.
- "Icahn can do the math and he seems to think the company's units are at least fully priced given the equity offering, which will add to his war chest as he pursues his distinctive brand of activist investing."
11:46 AMDeutsche a fan of NorthStar spinoff plan
- "We believe the separation of the asset management business will create value for shareholders, as the management company will trade at higher multiples than the traditional mortgage REIT and real estate business," says analyst Stephen Laws, reiterating his Buy rating on NorthStar Realty (NRF +16.2%) after the announced spinoff plan for the asset management business.
- His $12.50 price target is a "conservative valuation" given it values the asset management business at 12x 2014 cash available for distribution - the low end of a likely range of 12-18x. He also believes CAD is likely to show continued expansion thanks to growth in the non-listed REIT business as well as potential new income streams from managing additional funds.
- Earlier coverage
10:26 AMCiti adds Duncan Hennes to board
- Citigroup (C -1.1%) adds plenty of banking and hedge fund experience with its new board member, Duncan Hennes. Co-founder of bank advisory firm Promontory Financial Group, Hennes was previously CEO of Soros Fund Management, and a treasurer at Bankers Trust, where he led the consortium rescuing and taking over Long Term Capital Management in 1998.
- Press release
9:34 AMSunTrust agrees to sell asset management unit
- Asset management unit RidgeWorth Capital manages about $50.6B in assets (vs. $189,4B for the entire bank) and contributed about $25M to SunTrust's (STI -0.1%) YTD net income.
- The business is being sold to RidgeWorth employees and an investor group led by Lightyear Capital for up to $245M at closing and another $20M based on retention of certain assets. SunTrust estimates an after-tax gain on the sale of $50M.
- Press release
8:48 AMDimon pleased uncertainly over Volcker out of the way
- No surprise, but costs will rise and returns will decline at the big banks thanks to the Volcker rule, says Jamie Dimon (JPM), presenting at the Goldman financial services conference. Even if JPM's target ROE of 16% falls to the area of 14%, Dimon is confident in the bank's optimization efforts.
- "I'm glad that we now have certainty ... we'll be able to manage with Volcker."
- To review: Compliance with the near-1K-page rule has been delayed until July 2015.
- One must not forget to play the game: Dimon admits he lost track of keeping up with relationships with regulators the last several years. He says he will send "thank you" notes to congressional leaders for making a budget deal. To Paul Ryan and Patty Murray: "Thank you, thank you, and god bless you."
8:36 AMGramercy resumes preferred payments
- Gramercy Property Trust (GPT) declares a catch-up dividend in the amount of $10.23524 per preferred share, representing all accrued and unpaid payouts on the stock from Oct. 2008 until Oct. 15, 2013.
- The board declares quarterly preferred dividends of $0.50781 per share for the period from Oct. 15 through Jan. 14.
- Management reiterates its intention to initiate common stock dividends in 2014 Q1.
- Press release
8:08 AMWalter gains after MSR acquistion
- Walter Investment Management (WAC) is up 1.7% premarket after agreeing to buy MSRs with about $30B in UPB from "a large national depository."
- The portfolio consists of about 270K accounts - projected to be 99% current - and includes more than 100K HARP-eligible mortgages. The transfers are expected to occur in staged boardings in the first three quarters of 2014.
- Management's plan is to acquire MSRs with UPB of about $62B, and, to date, the company has entered into agreements for about $54B.
- Press release
7:55 AMNorthStar flies on spinoff plan
- NorthStar Realty (NRF) is now ahead 16.7% in the premarket following its plan to spin off its asset management business.
- The conference call is set for 10 ET, but the presentation slides are currently available.
- Certainly working at the moment is page 14 of the presentation which compares NRF's P/E multiple (8.3x) with that of what it picks out as competitors - Real Estate Managers (19.4x), Small Traditional Asset Managers (19.9x), MLP GPs (35.1x), and Altisource Asset Management (AAMC) at 50.1x.
- The comps may or may not make sense, but if NorthStar Asset Management is anything like the Altisource Asset Management spinoff, investors would be wise to get in early ... in size. AAMC's more than a 10-bagger since being spun off from Altisource Portfolio Solutions (ASPS) one year ago.
7:41 AMMoody's buys Amba Investment Services
- Boosting the research and analytical capabilities offered by Moody's Analytics, Moody's (MCO) acquires Amba Investment Services for an undisclosed amount of cash.
- About 10 years old, Amba is known for providing outsourced investment research and analytics to financial institutions. It's expected to generate about $39M in revenue this year.
- The deal isn't expected to have a material impact on Moody's EPS.
- Press release
7:16 AMLloyds fined $46M over sales program
- The £28.04M penalty is the largest ever by the U.K.'s Financial Conduct Authority (formerly the Financial Services Authority) for retail conduct. The regulator accused Lloyds (LYG) of failing to properly manage its compensation program so financial advisors - in order to meet sales targets - were not encouraged to push products on customers they didn't really need.
- “The findings do not make pleasant reading,” says Tracey McDermott, the F.C.A.’s director of enforcement and financial crime. “Financial incentive schemes are an important indicator of what management values and a key influence on the culture of the organization, so they must be designed with the customer at the heart.”
4:36 AMEU agrees on plan for dealing with failing banks
- European finance ministers could be creating the conditions for a future run on banks after agreeing on a framework for winding down failing firms in the sector.
- Crucially, major depositors will be a first port of call if a bank needs cash to shore up its finances, as happened in such brutal fashion in the bailout of Cyprus earlier this year.
- Money could then be taken from a country's national resolution fund, which could request assistance from the funds of other nations. Eventually, a common European-wide fund would be created.
- ETF: EUFN