Thursday, September 3, 2009

ACAS Paying More Interest, Not Getting Squashed

Despite the headline, ACAS doesn't suddenly owe hundreds of millions to "defaulted" unsecured creditors. In exchange for an agreement to pay default interest rates, retroactive to March 30, 2009, ACAS gets agreement not to institute involuntary bankruptcy proceedings or other unhappy consequences.

ACAS has things to do with its recently-acquired cash. Curiously, some of the notes involved in the non-acceleration deal were due to mature in two days -- but presumably will entitle holders to the bonus interest.

So, how is confidence in ACAS' management on the street? For what it's worth, Zacks just ranked AGNC as a "#1" or "strong buy". With jobless claims falling and the economy ostensibly in recovery, might things be looking up for ACAS' diverse portfolio of businesses?

Let's see the operating income.


Anonymous said...

Right on the money Jaded... Operating Income is everything... who cares about NAV right now - its all funny money valuations based on irrationality... ACAS's NOI IS everything... (and it wasn't very good last quarter - 9 cents) :(

What do you think about ALD's restructuring of their debt? Although it reduced their chances of bankruptcy - It will stunt growth at the company for years to come - deleveraging will make more sense to them because the current interest rate is so high... What do you think about this and how will this apply to ACAS's future???

Jaded Consumer said...

The NOI from last quarter was impacted by the backing-out of PIK income realized in a prior quarter. ACAS' NOI without this adjustment isn't obvious to me and I haven't had time to pour through the quarter yet.

I have this problem that I need to work ....

However, I'm encouraged by the deals I've seen in which ACAS realized cash. I'm eager to see how NOI looks without PIK adjustments on the next earnings release. The last quarter was nasty-looking on NOI, but I don't know how much of that was real and how much was re-valuing notes given in payment of notes (which is another symptom of illiquid assets and NAV worries).

The other thing that's interesting is that with ACAS' performance in AGNC so strong, one wonders whether performance at ACAS is really so bad or whether it derives largely from its (by stark contrast) illiquid portfolio (AGNC has a very liquid portfolio). Who knows.

I'll be watching operating income.

Anonymous said...

everyone talks about the debt and noi issues, but the fundamental problem is that they overbought at multiples that will take a very long time to return.

so when you compound a decline in multiples, contracting portfolio ebitda and a HUGE jump in nonaccruals, you will be stuck in a survival mode, rather than conserve or growth mode.

i am comfortable w my basis in the low 3s, but if it were any higher than i would dollar cost it down in a meaningful manner.

the divy is a dream. this will be a +2 year wait at best, as it will take time for the regional banks to finance the m&a game that the big boys used to own, thus predicating a serious turn of their portfolio and fees...