This item is part of Stockwatch's value added news feed and is only available to Stockwatch subscribers.Here is a sample of this item:Deerfield Capital Corp. Announces Second Quarter 2009 Results 2009-08-10 16:01 ET - News Release CHICAGO, Aug. 10 /PRNewswire-FirstCall/ -- Deerfield Capital Corp. ("DFR" or the "Company") today announced the results of operations for its second quarter ended June 30, 2009. Second Quarter 2009 Summary
-- Net income attributable to DFR for the quarter totaled $52.9 million, or
$7.85 per diluted common share, including a gain of $29.6 million, or
$4.39 per diluted share, as a result of the deconsolidation of Market
Square CLO Ltd. ("Market Square CLO").
-- Core earnings for the quarter totaled $5.5 million, or $0.82 per diluted
common share. Core earnings is a non-GAAP financial measure which
primarily reflects GAAP earnings excluding certain non-cash and special
charges and income tax effects (see reconciliation of non-GAAP measure
attached).
-- Unrestricted cash, cash equivalents, unencumbered residential mortgage
backed securities ("RMBS") and net equity in financed RMBS
totaled approximately $61.7 million at quarter end.
-- Assets under management ("AUM") totaled $9.9 billion at July
1, 2009.
-- Debt in the form of trust preferred securities amended to decrease net
worth covenant contained therein from $175 million to $50 million and to
provide that the measurement date for such covenant will begin on
September 30, 2012.
Commenting on the second quarter results, Jonathan Trutter, Chief Executive Officer, said, "The achievement of positive financial results in net income and core earnings for the second consecutive quarter was primarily driven by the following factors: first, investment advisory fees generated from the $9.9 billion of assets we manage; second, an overall increase in the values of assets held in our principal investing portfolio; third, solid net interest income from our principal investing portfolio; and, finally, the reduction in overall expenses from our cost savings initiatives." Trutter added, "We believe that our current quarter results along with the recently announced permanent amendment of our trust preferred debt significantly stabilizes our financial condition and will help pave the way for our ongoing focus on growing top line revenue." Second Quarter Financial Overview The results for the quarter ended June 30, 2009 reflect the Company's second consecutive quarter of positive net income and core earnings. The overall lower interest rate environment reduced the Company's cost of financing, which was the most significant driver in the Company's improved net interest income and core earnings as compared to the three months ended March 31, 2009. The improvement in net interest income was partially offset by the expected decline in investment advisory fees. Total expenses increased as compared to the first quarter of 2009 primarily due to the required consolidation of Deerfield Pegasus Loan Capital LP ("DPLC"), the Company's investment venture with Pegasus Capital Advisors L.P. ("Pegasus"), which incurred expenses of $3.6 million during the second quarter of 2009. These expenses were paid for by DPLC and are consolidated for GAAP financial reporting purposes. A net loss of $2.9 million related to the portion of DPLC the Company does not own is added back at the bottom of our statement of operations as "Net loss attributable to noncontrolling interest" in arriving at "Net income attributable to DFR." Excluding the DPLC expenses, total expenses were relatively flat with an increase of $0.1 million as compared to the first quarter of 2009. The $58.7 million of net other income and gain for the second quarter was primarily a result of the deconsolidation of Market Square CLO and the improvement in asset values, which contributed $29.6 million and $29.1 million to net income, respectively. These amounts are excluded from core earnings. The net gain on the deconsolidation of Market Square CLO represented the reversal of the losses in excess of the amount at risk that had previously been required to be recorded in accordance with GAAP. As of June 30, 2009, none of the Market Square CLO assets, liabilities or equity are included in the Company's condensed consolidated balance sheet; however, all of the financial impacts to the condensed consolidated statement of operations from the previous consolidation of Market Square CLO were recognized through June 30, 2009. The net income attributable to DFR for the quarter totaled $52.9 million, or $7.85 per diluted common share, an improvement of $41.4 million as compared to the net income attributable to DFR of $11.5 million, or $1.72 per diluted common share, during the first quarter of 2009. During the second quarter, DFR also had positive core earnings of $5.5 million, or $0.82 per share, an increase of $0.5 million, or 10.0 percent, as compared to the $5.0 million, or $0.75 per share, of core earnings generated during the first quarter of 2009. Net interest income totaled $8.4 million for the quarter ended June 30, 2009, an increase of $1.6 million, or 23.5 percent, as compared to $6.8 million in the first quarter of 2009. The overall lower interest rate environment during the quarter resulted in a $1.3 million reduction in interest expense as compared to the first quarter of 2009. While interest income attributable to the Company's RMBS portfolio declined by $0.3 million, the corporate debt investments interest income increased by $0.6 million as compared to the first quarter of 2009. Market Square CLO contributed net interest income of $1.8 million for the second quarter, consisting of $3.0 million of interest income, less $1.2 million of interest expense. The deconsolidation of Market Square CLO as of June 30, 2009 will result in decreased net interest income in the financial results of future periods. Investment advisory fees totaled $4.0 million in the quarter, a decline of $0.7 million, or 14.9 percent, as compared to $4.7 million in the first quarter of 2009. The decrease in investment advisory fees was primarily the result of the breach of certain overcollateralization tests contained in the indentures governing certain of the collateralized loan obligations ("CLOs") that the Company manages. Pursuant to the terms of the Company's CLO management agreements, all or a portion of the Company's subordinated management fees may be deferred if, among other things, overcollateralization tests and other structural protections built into the CLOs are breached and cash flows are diverted from the payment of management fees and other expenses to the prepayment of principal of the debt securities issued by the CLOs. Breaches of overcollateralization tests may occur if, for example, the issuers of the collateral held by the CLOs default on or defer payment of principal or the ratings assigned to such collateral are downgraded below a specified threshold. Subordinated investment advisory fees declined by $0.9 million during the three months ended June 30, 2009 as compared to the first quarter of 2009. The Company expects its subordinated investment advisory fees to continue to be deferred in the near term. However, over time and with improvement in market conditions, the Company expects the CLOs to regain compliance with the overcollateralization tests and, subject to the satisfaction of certain other conditions, the Company would expect to recoup at least a portion and potentially substantially all of the deferred subordinated management fees and to receive future CLO subordinated management fees on a current basis. The provision for loan losses was $9.1 million for the quarter as compared to $2.1 million in the first quarter of 2009. This quarter's provision for loan losses consisted of $8.8 million related to loans held in DFR Middle Market CLO Ltd. ("DFR MM CLO") and $0.3 million related to commercial real estate loans. Expenses totaled $12.0 million for the quarter, an increase of $3.7 million, or 44.6 percent, as compared to $8.3 million in the first quarter of 2009. The increase was primarily the result of $3.6 million of expenses related to DPLC, $3.2 million of which were one-time organizational and structuring fees. Excluding the $3.6 million of expenses, which were borne by DPLC and required to be consolidated into the financial results of the Company, expenses were nearly flat with a $0.1 million, or 1.2 percent, increase as compared to the first quarter of 2009. Other income and gain (loss) was a net gain of $58.7 million in the quarter as compared to a net gain of $10.5 million in the first quarter of 2009. The improvement in the current quarter primarily resulted from the deconsolidation of Market Square CLO, which contributed $29.6 million of gain. This gain represents the reversal of losses in excess of the amount of the Company's investment at risk, required to be recorded in prior periods The Company also had net gains of $24.9 million related to the Company's loan portfolio. These net gains largely consisted of unrealized appreciation in the assets held in Market Square CLO. The Company's future results will not reflect changes in the values of loans held in Market Square CLO as a result of its deconsolidation. The Company also experienced net gains in the remainder of its principal investing portfolio of $4.2 million. Trust Preferred Debt Amendment As previously announced, on July 31, 2009, the Company entered into three supplemental indentures (the "Supplemental Indentures") with the holders of the trust preferred securities issued by each of Deerfield Capital Trust I, Deerfield Capital Trust II and Deerfield Capital Trust III (collectively the "Trust Preferred Securities"). The Supplemental Indentures amend the consolidated net worth covenants (the "Net Worth Covenants") contained in the indentures governing the Trust Preferred Securities to (i) permanently decrease the net worth required by the Net Worth Covenants from $175 million to $50 million and (ii) provide that the initial measurement date for compliance with the Net Worth Covenants will be September 30, 2012. These provisions supersede the temporary waiver of the Net Worth Covenants obtained from the holders of the Trust Preferred Securities in November 2008. The Supplemental Indentures also contain provisions prohibiting the Company from incurring additional indebtedness and declaring additional dividends and distributions on its capital stock, in each case for the life of the Trust Preferred Securities and except as specifically permitted under the terms of the Supplemental Indentures. AUM As of July 1, 2009, the Company's AUM totaled approximately $9.9 billion held in 28 collateralized debt obligations ("CDOs"), one other investment vehicle and six separately managed accounts. Investment Portfolio Total invested assets decreased by $226.8 million, or 27.0 percent, to $612.9 million as of June 30, 2009 as compared to the end of the first quarter of 2009. The decrease was primarily attributable to the deconsolidation of Market Square CLO. Liquidity Unencumbered RMBS and unrestricted cash and cash equivalents aggregated $45.1 million at June 30, 2009. In addition, net equity in the financed RMBS portfolio (including associated interest rate swaps), excluding the unencumbered RMBS included above, totaled $16.6 million at quarter end. In total, the Company had unrestricted cash and cash equivalents, unencumbered RMBS and net equity in its financed RMBS portfolio of $61.7 million as of June 30, 2009. As of June 30, 2009, the fair value of its Agency RMBS and non-Agency RMBS portfolios were $308.0 million and $3.1 million, respectively. About the Company DFR, through its subsidiary, Deerfield Capital Management LLC, manages client assets, including bank loans and other corporate debt, RMBS, government securities and asset-backed securities. In addition, DFR has a principal investing portfolio comprised of fixed income investments, including bank loans and other corporate debt and RMBS. For more information, please go to the Company website, at www.deerfieldcapital.com. * * Notes and Tables to Follow * * NOTES TO PRESS RELEASE Certain statements in this press release are forward-looking as defined by the Private Securities Litigation Reform Act of 1995. These include statements regarding future results or expectations. Forward-looking statements can be identified by forward looking language, including words such as "believes," "anticipates," "expects," "estimates," "intends," "may," "plans," "projects," "will" and similar expressions, or the negative of these words. Such forward-looking statements are based on facts and conditions as they exist at the time such statements are made. Forward-looking statements are also based on predictions as to future facts and conditions, the accurate prediction of which may be difficult and involve the assessment of events beyond the control of Deerfield Capital Corp. and its subsidiaries ("DFR"). Forward-looking statements are further based on various operating assumptions. Caution must be exercised in relying on forward-looking statements. Due to known and unknown risks, actual results may differ materially from expectations or projections. DFR does not undertake any obligation to update any forward-looking statement, whether written or oral, relating to matters discussed in this press release, except as may be required by applicable securities laws. Various factors could cause DFR's actual results to differ materially from those described in any forward-looking statements. These factors include, but are not limited to: changes in economic and market conditions, particularly as they relate to the markets for debt securities, such as RMBS, and CDOs; continued availability of financing; DFR's ability to maintain adequate liquidity; changes in DFR's investment, hedging or credit strategies or the performance and values of its investment portfolios; whether the conditions to Pegasus Capital Advisors L.P.'s DPLC investment commitments are satisfied; DFR's ability to comply with the continued listing standards of the NYSE Amex LLC; DFR's ability to generate earnings or raise capital to achieve positive stockholders' equity; the effects of defaults or terminations under, and DFR's ability to enter into replacement transactions with respect to, repurchase agreements, interest rate swaps and long-term debt obligations; reductions in DFR's assets under management and related management and advisory fee revenue; DFR's ability to make investments in new investment products and realize growth of fee-based income; changes to DFR's tax status; DFR's ability to forecast its tax attributes, which are based upon various facts and assumptions, and its ability to protect and use its net operating losses to offset taxable income; DFR's ability to maintain compliance with its existing debt instruments and other contractual obligations; impact of restrictions contained in DFR's existing debt instruments; DFR's ability to maintain its exemption from registration as an investment company pursuant to the Investment Company Act of 1940; the cost, uncertainties and effect of any legal and administrative proceedings, such as the current Securities and Exchange Commission ("SEC") investigation into certain mortgage-backed securities trading procedures in connection with which the SEC has requested certain information from DFR regarding certain of its mortgage securities trades; DFR's ability to enter into, and the effects of, any potential strategic transactions; and changes in, and the ability of DFR to remain in compliance with, law, regulations or government policies affecting DFR's business, including investment management regulations and accounting standards. These and other factors that could cause DFR's actual results to differ materially from those described in the forward-looking statements are set forth in DFR's annual report on Form 10-K for the year ended December 31, 2008, DFR's quarterly reports on Form 10-Q and DFR's other public filings with the SEC and public statements. Readers of this press release are cautioned to consider these risks and uncertainties and not to place undue reliance on any forward-looking statements.
DEERFIELD CAPITAL CORP. AND ITS SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
June 30, March 31, June 30,
2009 2009 2008
---- ---- ----
(In thousands, except share
and per share amounts
----------------------------
ASSETS
Cash and cash equivalents $41,846 $42,354 $44,532
Due from broker 3,621 23,939 20,716
Restricted cash and cash equivalents 27,201 23,905 68,462
Available-for-sale securities-at fair
value - 2,619 7,403
Investments at fair value, including
$309,278, $335,252 and 1,434,493
pledged 318,310 339,436 1,445,802
Other investments 4,780 4,764 5,472
Derivative assets 61 21 1,780
Loans held for sale 9,363 210,616 264,559
Loans held for investment 309,021 304,438 383,663
Allowance for loan losses (28,589) (22,171) (7,883)
------- ------- ------
Loans held for investment, net of
allowance for loan losses 280,432 282,267 375,780
Investment advisory fee receivables 2,009 2,030 5,142
Interest receivable 3,287 4,360 8,061
Other receivable 1,264 2,513 985
Prepaid and other assets 8,410 11,678 13,992
Deferred tax asset, net - - 13,422
Fixed assets, net 8,498 8,820 9,793
Intangible assets, net 25,558 26,997 70,642
Goodwill - - 78,158
--- --- ------
TOTAL ASSETS $734,640 $986,319 $2,434,701
======== ======== ==========
LIABILITIES
Repurchase agreements, including $83,
$53 and $915 of accrued interest $294,470 $318,641 $1,408,955
Due to broker 1,800 - 5,649
Dividend Payable - - 1,667
Derivative liabilities 953 13,817 6,796
Interest payable 1,661 2,575 5,029
Accrued and other liabilities 4,210 7,190 25,751
Short term debt - - 483
Long term debt 427,530 714,622 755,541
------- ------- -------
TOTAL LIABILITIES 730,624 1,056,845 2,209,871
------- --------- ---------
STOCKHOLDERS' EQUITY (DEFICIT)
Preferred stock, par value $0.001:
100,000,000 shares authorized;
14,999,992 shares issued and zero
outstanding - - -
Common stock, par value $0.001:
500,000,000 shares authorized;
6,455,466 and 6,455,466 and
6,675,836 shares issued and
6,454,924 and 6,454,383 and
6,669,342 shares outstanding 6 6 6
Additional paid-in capital 866,534 865,910 866,261
Accumulated other comprehensive loss (49) (3,928) (2,523)
Accumulated deficit (879,648) (932,514) (638,914)
-------- -------- --------
DEERFIELD CAPITAL CORP.
STOCKHOLDERS' DEFICIT (13,157) (70,526) 224,830
Noncontrolling interest in consolidated
entity 17,173 - -
------ --- ---
TOTAL STOCKHOLDERS' EQUITY
(DEFICIT) 4,016 (70,526) 224,830
----- ------- -------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT) $734,640 $986,319 $2,434,701
======== ======== ==========
DEERFIELD CAPITAL CORP. AND ITS SUBSIDIARIES
CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)
Three months ended Six months ended
June 30, March 31, June 30, June 30,
2009 2009 2008 2009 2008
---- ---- ---- ---- ----
(In thousands, except share and per share amounts)
----------------------------------------------------
Revenues
Interest income $14,098 $13,782 $21,824 $27,880 $83,174
Interest expense 5,666 6,999 12,421 12,665 60,021
----- ----- ------ ------ ------
Net interest
income 8,432 6,783 9,403 15,215 23,153
Provision for loan
losses 9,119 2,107 2,302 11,226 4,502
----- ----- ----- ------ -----
Net interest
(expense)
income after
provision for
loan losses (687) 4,676 7,101 3,989 18,651
Investment advisory
fees 4,009 4,737 12,359 8,746 24,478
----- ----- ------ ----- ------
Total net
revenues 3,322 9,413 19,460 12,735 43,129
----- ----- ------ ------ ------
Expenses
Compensation and
benefits 3,029 3,354 7,635 6,383 16,736
Professional services 728 790 2,343 1,518 3,730
Insurance expense 771 764 733 1,535 1,467
Other general and
administrative
expenses 4,814 946 1,850 5,760 3,280
Depreciation and
amortization 1,629 1,635 2,580 3,264 5,267
Occupancy 569 639 609 1,208 1,230
Management and
incentive fee expense
to related party 295 - - 295 -
Cost savings
initiatives 28 197 70 225 327
Impairment of
intangible assets
and goodwill 126 - 1,128 126 29,034
--- --- ----- --- ------
Total
expenses 11,989 8,325 16,948 20,314 61,071
------ ----- ------ ------ ------
Other Income and Gain
(Loss)
Net (loss) gain on
available-for-sale
securities - (31) (3,856) (31) (3,856)
Net gain (loss)
on investments
at fair value 1,173 5,138 (1,747) 6,311 (202,466)
Net gain (loss)
on loans 24,876 5,815 5,505 30,691 (21,037)
Net gain (loss)
on derivatives 2,981 (404) 6,070 2,577 (217,145)
Dividend income
and other net
gain (loss) 152 (49) 76 103 194
Net gain on the
deconsolidation
of Market Square
CLO 29,551 - - 29,551 -
------ --- --- ------ ---
Net other
income
and gain
(loss) 58,733 10,469 6,048 69,202 (444,310)
------ ------ ----- ------ --------
Income (loss) before
income tax expense
(benefit) 50,066 11,557 8,560 61,623 (462,252)
Income tax expense
(benefit) 160 18 2,868 178 (4,334)
--- --- ----- --- ------
Net income (loss) 49,906 11,539 5,692 61,445 (457,918)
Less: Cumulative
convertible
preferred stock
dividends and
accretion - - - - 2,393
--- --- --- --- -----
Net income (loss)
attributable to
common stockholders 49,906 11,539 5,692 61,445 (460,311)
Net loss
attributable to
noncontrolling
interest 2,960 - - 2,960 -
----- --- --- ----- ---
Net income (loss)
attributable to
Deerfield Capital
Corp. $52,866 $11,539 $5,692 $64,405 $(460,311)
======= ======= ====== ======= =========
Net income (loss)
attributable to
Deerfield Capital
Corp. per share -
basic $7.85 $1.72 $0.83 $9.59 $(74.08)
Net income (loss)
attributable to
Deerfield Capital
Corp. per share -
diluted $7.85 $1.72 $0.83 $9.59 $(74.08)
WEIGHTED-AVERAGE
NUMBER OF SHARES
OUTSTANDING -
BASIC 6,730,655 6,702,329 6,881,715 6,716,570 6,213,318
WEIGHTED-AVERAGE
NUMBER OF SHARES
OUTSTANDING -
DILUTED 6,730,655 6,702,329 6,881,715 6,716,570 6,213,318
DEERFIELD CAPITAL CORP. AND ITS SUBSIDIARIES
RECONCILIATION OF NON-GAAP MEASURE
The Company believes that core earnings, a non-GAAP financial measure, is
a useful metric for evaluating and analyzing its performance. The
calculation of core earnings, which the Company uses to compare financial
results from period to period, eliminates the impact of certain non-cash
and special charges and income tax. Core earnings provided herein may not
be comparable to similar measures presented by other companies as it is a
non-GAAP financial measure and may therefore be defined differently by
other companies. Core earnings includes the earnings from the Company's
consolidated variable interest entity ("VIE"), DFR MM CLO, and from Market
Square CLO, which was a consolidated VIE until the Company sold all of its
preference shares in Market Square CLO and deconsolidated that entity as
of June 30, 2009. Core earnings is not indicative of cash flows received
from these VIEs.
Core Earnings
The table below provides reconciliation between net income (loss) and
core earnings:
Three months ended Six months ended
June 30, March 31, June 30, June 30,
2009 2009 2008 2009 2008
---- ---- ---- ---- ----
(In thousands, except share and per share amounts)
----------------------------------------------------
Net income (loss) $49,906 $11,539 $5,692 $61,445 $(457,918)
Add back:
Provision for
loan losses 9,119 2,107 2,302 11,226 4,502
Cost saving
initiatives 28 197 70 225 327
Depreciation and
amortization 1,629 1,635 2,580 3,264 5,267
Impairment of
intangible assets
and goodwill 126 - 1,128 126 29,034
Net other income
and (gain) loss (58,733) (10,469) (6,048) (69,202) 444,310
Income tax
expense (benefit) 160 18 2,868 178 (4,334)
Noncontrolling
interest core
earnings (1) 3,297 - - 3,297 -
----- --- --- ----- ---
Core earnings $5,532 $5,027 $8,592 $10,559 $21,188
====== ====== ====== ======= =======
Core earnings per
share - diluted $0.82 $0.75 $1.25 $1.57 $3.41
Weighted-average
number of shares
outstanding -
diluted 6,730,655 6,702,329 6,881,715 6,716,570 6,213,318
(1) Noncontrolling interest core earnings represents the portion of the
net interest income and expenses of DPLC that are attributable to third
party investors in DPLC, calculated using each investor's ownership
percentage in DPLC during the measurement period.
DEERFIELD CAPITAL CORP. AND ITS SUBSIDIARIES
INVESTMENT ADVISORY FEES AND INTEREST INCOME AND EXPENSE
The following table summarizes the Company's investment advisory fees and
interest income and expense:
Three months ended Six months
June March June ended
30, 31, 30, June 30,
2009 2009 2008 2009 2008
---- ---- ---- ---- ----
(In thousands)
--------------
CDO management fees:
Senior fees $2,892 $2,938 $3,756 $5,830 $8,073
Subordinated fees 525 1,403 3,646 1,928 7,188
Performance fees 245 152 2,702 397 2,774
--- --- ----- --- -----
Total CDO management fees 3,662 4,493 10,104 8,155 18,035
Separately managed accounts and
other 223 244 263 467 509
Other investment vehicle 124 - - 124 -
Fixed income arbitrage investment
funds - - 1,992 - 5,934
--- --- ----- --- -----
Total investment advisory fees $4,009 $4,737 $12,359 $8,746 $24,478
====== ====== ======= ====== =======
Interest Income:
RMBS, U.S. Treasury bills and
other securities $4,258 $4,561 $6,755 $8,819 $49,880
Assets held in Market Square CLO 3,003 3,070 4,281 6,073 9,508
Assets held in DFR MM CLO 6,226 5,820 7,003 12,046 15,243
Assets held in DPLC 35 - - 35 -
Other corporate debt 576 331 3,785 907 8,543
--- --- ----- --- -----
Total interest income 14,098 13,782 21,824 27,880 83,174
====== ====== ====== ====== ======
Interest Expense:
Recourse:
Repurchase agreements and
other short term debt $605 $692 $3,310 $1,297 $40,018
Series A and Series B notes 1,311 1,340 1,439 2,651 3,258
Trust preferred securities 1,382 1,623 1,985 3,005 4,245
----- ----- ----- ----- -----
Total recourse interest
expense 3,298 3,655 6,734 6,953 47,521
----- ----- ----- ----- ------
Non-Recourse
Market Square CLO 1,205 1,705 2,563 2,910 5,919
DFR MM CLO 1,131 1,545 2,264 2,676 5,220
Wachovia Facility 32 94 860 126 1,361
--- --- --- --- -----
Total non-recourse interest
expense 2,368 3,344 5,687 5,712 12,500
----- ----- ----- ----- ------
Total interest expense $5,666 $6,999 $12,421 $12,665 $60,021
====== ====== ======= ======= =======
DEERFIELD CAPITAL CORP. AND ITS SUBSIDIARIES
AUM AND INVESTMENT PORTFOLIO
The following table summarizes AUM for each product category:
July 1, 2009 April 1, 2009 July 1, 2008
------------ ------------- ------------
Number of Number of Number of
Accounts AUM Accounts AUM Accounts AUM
-------- --- -------- --- -------- ---
(In (In (In
thousands) thousands) thousands)
---------- ---------- ----------
CDOs (1) :
CLOs 12 $4,098,226 12 $4,184,002 15 $5,151,278
Asset-backed
securities 12 4,561,067 12 4,906,125 13 6,336,532
Corporate
bonds 4 855,050 4 910,924 2 620,883
--- ------- --- ------- --- -------
Total
CDOs 28 9,514,343 28 10,001,051 30 12,108,693
Other investment
vehicle (2) 1 22,106 0 - 0 -
Fixed income
arbitrage 0 - 0 - 1 436,156
Separately managed
accounts (3) 6 322,928 6 320,488 6 431,480
------- ------- -------
Total AUM (4) $9,859,377 $10,321,539 $12,976,329
========== =========== ===========
(1) CDO AUM numbers generally reflect the aggregate principal or notional
balance of the collateral and, in some cases, the cash balance held by the
CDOs and are as of the date of the last trustee report received for each
CDO prior to July 1, 2009, April 1, 2009, and July 1, 2008, respectively.
The AUM for our Euro-denominated CDOs has been converted into U.S. dollars
using the spot rate of exchange on June 30, 2009, March 31, 2009 and June
30, 2008, respectively.
(2) Other investment vehicle AUM represents the AUM of DPLC.
(3) AUM for certain of the separately managed accounts is a multiple of
the capital actually invested in such account. Management fees for these
accounts are paid on this higher AUM amount.
(4) Included in Total AUM for July 1, 2009 are $289.8 million and $22.1
million related to DFR MM CLO and DPLC, respectively, which amounts are
also included in the total AUM reported for the Principal Investing
portfolio as of June 30, 2009. Included in Total AUM for April 1, 2009 are
$296.5 million and $293.8 million related to Market Square CLO and DFR MM
CLO, respectively, which amounts are also included in the total AUM
reporting for the Principal Investing portfolio as of March 31, 2009.
Included in Total AUM for July 1, 2008 are $295.3 million and $300.8
million related to Market Square CLO and DFR MM CLO, respectively, which
amounts are also included in the total AUM reporting for the Principal
Investing portfolio as of June 30, 2008. DCM manages DFR MM CLO but is
not contractually entitled to receive any management fees so long as 100
percent of the equity is held by DC LLC or an affiliate thereof. DCM
manages DPLC and receives management fees for its services. All other
amounts included in the Principal Investing portfolio are excluded from
Total AUM.
The following table summarizes the principal investing portfolio:
June 30, 2009 March 31, 2009 June 30, 2008
------------- -------------- -------------
% of % of % of
Total Total Total
Principal Carrying Invest- Carrying Invest- Carrying Invest-
Investments Value ments Value ments Value ments
------------ ----- ------ ----- ------ ----- ------
(In (In (In
thousands) thousands) thousands)
---------- ---------- ----------
RMBS (1) $311,154 48.5% $338,729 39.3% $444,185 21.1%
U.S. Treasury
Bills - 0.0% - 0.0% 999,954 47.5%
Corporate leveraged loans:
Loans held in
DFR MM CLO
(2) 299,751 46.7% 292,108 33.9% 259,577 12.3%
Loans held in
Wachovia
Facility 1,251 0.2% 4,831 0.6% 89,627 4.2%
Other corporate
leveraged
loans 8,112 1.3% 8,270 1.0% 24,879 1.2%
Loans held in
DPLC 6,841 1.1% - 0.0% - 0.0%
Assets held in
Market Square
CLO (3) - 0.0% 200,841 23.3% 263,037 12.5%
Commercial real
estate loans and
securities 9,270 1.4% 12,330 1.4% 17,212 0.8%
Equity securities 4,780 0.7% 4,764 0.5% 5,472 0.3%
Other investments 315 0.1% - 0.0% 1,293 0.1%
--- --- --- --- ----- ---
Total Investments 641,474 100.0% 861,873 100.0% 2,105,236 100.0%
===== ===== =====
Allowance for
loan losses (28,589) (22,171) (7,883)
------- ------- ------
Net Investments $612,885 $839,702 $2,097,353
======== ======== ==========
(1) RMBS consist of agency RMBS with estimated fair values of $308.0
million, $333.9 million and $415.3 million as of June 30, 2009, March 31,
2009 and June 30, 2008, respectively, and non-agency RMBS with estimated
fair values of $3.1 million, $4.8 million and $28.9 million as of
June 30, 2009, March 31, 2009 and June 30, 2008, respectively.
(2) Assets held in DFR MM CLO are the result of the July 17, 2007
securitization of corporate loans held in a non-recourse credit facility.
The Company purchased 100 percent of the equity interests for $50.0
million and all of the BBB/Baa2 rated notes for $19.0 million.
(3) Assets held in Market Square CLO include syndicated bank loans of
$197.5 million and $257.9 million, high yield corporate bonds and ABS of
$2.6 million and $5.1 million and other investments of $0.7 million and
zero as of March 31, 2009 and June 30, 2008, respectively.
SOURCE Deerfield Capital Corp. Deerfield Capital Corp. The remainder is available to Stockwatch subscribers.
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