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CHICAGO, Nov. 9 /PRNewswire-FirstCall/ -- Deerfield Capital Corp. (NYSE AMEX: DFR) ("DFR" or the "Company") today announced the results of operations for its third quarter ended September 30, 2009.
Third Quarter 2009 Summary
-- Net income attributable to DFR for the quarter totaled $1.8 million, or
$0.27 per diluted common share.
-- Core earnings for the quarter totaled $5.2 million, or $0.77 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).
-- 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 initial measurement date for compliance with such
covenant will be September 30, 2012.
-- Unrestricted cash, cash equivalents, unencumbered residential mortgage
backed securities ("RMBS") and net equity in financed RMBS totaled
approximately $61.4 million at quarter end.
-- Assets under management ("AUM") totaled $9.6 billion at October 1, 2009.
Commenting on the third quarter results, Jonathan Trutter, Chief Executive Officer, said, "We are pleased to announce our third consecutive quarter of positive net income and core earnings. The stabilization of our financial results, strong liquidity position and permanent amendments to our trust preferred debt are significant accomplishments that we expect will improve the overall future outlook for DFR." Trutter added, "We continue to actively pursue new business opportunities to provide top line revenue growth as well as potential strategic opportunities to improve stockholder value."
Third Quarter Financial Overview
The results for the quarter ended September 30, 2009 reflect the Company's third consecutive quarter of positive net income and core earnings. The net income attributable to DFR for the quarter totaled $1.8 million, or $0.27 per diluted common share, a decline of $51.1 million as compared to $52.9 million, or $7.85 per diluted common share, during the second quarter of 2009. The Company's decline in net income for the quarter, as compared to the second quarter of 2009, was primarily related to the non-recurring deconsolidation of Market Square CLO Ltd. ("Market Square CLO") as of June 30, 2009. Market Square CLO provided $1.8 million of net interest income and $58.3 million in other income and gain (loss), $29.6 million of which was directly related to the deconsolidation of Market Square CLO and $28.7 million was related to appreciation of loans in the Market Square CLO portfolio, during the second quarter of 2009. The third quarter of 2009 showed a reduction in both the provision for loan losses and total expenses by $4.9 million and $4.3 million, respectively, as compared to the second quarter of 2009.
During the third quarter, DFR also had positive core earnings of $5.2 million, or $0.77 per share, a decrease of $0.3 million, or 5.5 percent, as compared to the $5.5 million, or $0.82 per share, of core earnings generated during the second quarter of 2009. Third quarter 2009 core earnings, which did not benefit from any contributions from Market Square CLO (as a result of its deconsolidation as of June 30, 2009), compare favorably with the second quarter 2009 core earnings, which included a net contribution of $1.7 million from Market Square CLO.
Net interest income totaled $7.0 million for the quarter ended September 30, 2009, a decrease of $1.4 million, or 16.7 percent, as compared to $8.4 million in the second quarter of 2009. The deconsolidation of Market Square CLO as of June 30, 2009 resulted in a $1.8 million decrease in net interest income compared to the second quarter of 2009. This decrease in net interest income was partially offset by a $0.6 million reduction in interest expense as compared to the second quarter of 2009 (excluding Market Square CLO) primarily resulting from the overall lower interest rate environment during the quarter. While interest income attributable to DFR Middle Market CLO Ltd. ("DFR MM CLO") and the Company's other corporate debt portfolio declined by $0.3 million and $0.3 million, respectively, interest income attributable to the Company's RMBS portfolio increased by $0.2 million, as compared to the second quarter of 2009.
Investment advisory fees totaled $3.9 million in the quarter, a decline of $0.1 million, or 2.5 percent, as compared to $4.0 million in the second quarter of 2009. The decrease in investment advisory fees was primarily the result of noncompliance with certain overcollateralization tests contained in the indentures governing certain of the collateralized loan obligations ("CLOs") that the Company manages. All or a portion of the Company's subordinated management fees from the CLOs may be deferred if, among other things, noncompliance with overcollateralization tests and other structural provisions cause cash flows from the CLOs to be diverted from the payment of management fees and other expenses to the prepayment of principal of the debt securities issued by the CLOs. Noncompliance with 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. The Company expects substantially all of its CLO subordinated investment advisory fees to continue to be deferred in the near term. However, over time and with improvement in market conditions and effective portfolio management, 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 $4.2 million for the quarter as compared to $9.1 million in the second quarter of 2009. This quarter's provision for loan losses related entirely to loans held in DFR MM CLO.
Expenses totaled $7.7 million for the quarter, a decrease of $4.3 million, or 35.8 percent, as compared to $12.0 million in the second quarter of 2009. The decrease was primarily the result of $3.6 million of expenses recorded during the second quarter of 2009 related to Deerfield Pegasus Loan Capital LP ("DPLC"), the Company's investment venture with Pegasus Capital Advisors L.P. which the Company is required to consolidate, $3.2 million of which were one-time organizational and structuring fees. The expenses were paid by DPLC but are consolidated for GAAP reporting purposes. Net income (loss) related to the portion of DPLC that the Company does not own is added back to the Company's statement of operations as "Net (income) loss attributable to noncontrolling interest" in arriving at "Net income attributable to DFR." Excluding the $3.2 million of one-time expenses related to DPLC, third quarter expenses declined by $1.1 million, or 12.5 percent, as compared to the second quarter of 2009. The $0.4 million decline in compensation and benefits was primarily the result of a higher bonus accrual during the second quarter of 2009 as compared to the third quarter. The $0.7 million decrease in other general and administrative expenses during the third quarter of 2009 (excluding the one-time organizational expenses) was primarily the result of the Company's annual stock compensation award to the board of directors and a one-time success fee paid to our chairman during the second quarter of 2009.
Other income and gain (loss) was a net gain of $3.0 million in the quarter as compared to a net gain of $58.7 million in the second quarter of 2009. The decline in the current quarter primarily resulted from the deconsolidation of Market Square CLO on June 30, 2009. During the second quarter of 2009, Market Square CLO contributed $29.6 million of gains as a result of deconsolidation and $28.7 million in gains on its loan portfolio.
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 October 1, 2009, the Company's AUM totaled approximately $9.6 billion held in 28 collateralized debt obligations ("CDOs"), DPLC and six separately managed accounts.
Investment Portfolio
Total invested assets increased by $7.3 million, or 1.2 percent, to $620.2 million as of September 30, 2009 as compared to the end of the second quarter of 2009. The increase was primarily attributable to purchases of investments in DPLC.
Liquidity
Unencumbered RMBS and unrestricted cash and cash equivalents aggregated $50.6 million at September 30, 2009. In addition, net equity in the financed RMBS portfolio (including associated interest rate swaps), excluding the unencumbered RMBS included above, totaled $10.8 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 $61.4 million as of September 30, 2009. As of September 30, 2009, the fair value of its Agency RMBS and non-Agency RMBS portfolios were $314.0 million and $2.9 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 maintain positive stockholders' equity; 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; DFR's receipt of previously deferred CLO subordinated management fees and its receipt of future CLO subordinated management fees on a current basis; changes to DFR's tax status; DFR's 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)
September June September
30, 30, 30,
2009 2009 2008
---- ---- ----
(In thousands, except share and
per share amounts)
-------------------------------
ASSETS
Cash and cash equivalents $47,542 $41,846 $41,908
Due from broker 1,004 3,621 12,715
Restricted cash and cash equivalents 21,786 27,201 63,034
Available-for-sale securities-at fair
value - - 5,078
Investments at fair value, including
$315,241, $309,278 and $408,660 pledged 336,170 318,310 415,462
Other investments 4,287 4,780 4,764
Derivative assets 74 61 2,004
Loans held for sale 9,053 9,363 267,419
Loans held for investment 295,916 309,021 356,709
Allowance for loan losses (24,131) (28,589) (21,596)
------- ------- -------
Loans held for investment, net
of allowance for loan losses 271,785 280,432 335,113
Investment advisory fee receivables 2,189 2,009 4,077
Interest receivable 3,447 3,287 7,804
Other receivable 1,995 1,264 3,131
Prepaid and other assets 8,373 8,410 12,911
Fixed assets, net 8,181 8,498 9,470
Intangible assets, net 24,246 25,558 36,364
------ ------ ------
TOTAL ASSETS $740,132 $734,640 $1,221,254
======== ======== ==========
LIABILITIES
Repurchase agreements, including $74,
$83 and $336 of accrued interest $306,304 $294,470 $383,617
Due to broker 2,975 1,800 2,298
Dividend Payable - - 7,354
Derivative liabilities 832 953 7,927
Interest payable 1,255 1,661 4,901
Accrued and other liabilities, including
$414, zero and zero at fair value 4,955 4,210 15,209
Short term debt - - 172
Long term debt 417,921 427,530 736,408
------- ------- -------
TOTAL LIABILITIES 734,242 730,624 1,157,886
------- ------- ---------
STOCKHOLDERS' EQUITY
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;
6,455,357 and 6,455,466 and
6,676,106 shares issued and
6,454,924 and 6,454,924 and
6,669,742 shares outstanding 6 6 7
Additional paid-in capital 866,546 866,534 866,330
Accumulated other comprehensive loss (111) (49) (1,525)
Accumulated deficit (877,832) (879,648) (801,444)
-------- -------- --------
DEERFIELD CAPITAL CORP.
STOCKHOLDERS' (DEFICIT) EQUITY (11,391) (13,157) 63,368
Noncontrolling interest in consolidated
entity 17,281 17,173 -
------ ------ ---
TOTAL STOCKHOLDERS' EQUITY 5,890 4,016 63,368
----- ----- ------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $740,132 $734,640 $1,221,254
======== ======== ==========
DEERFIELD CAPITAL CORP. AND ITS SUBSIDIARIES
CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)
Three months ended
------------------- Nine months ended
September June September September 30,
30, 30, 30, -------------
2009 2009 2008 2009 2008
---- ---- ---- ---- ----
(In thousands, except share and per share amounts)
--------------------------------------------------
Revenues
Interest income $10,839 $14,098 $20,506 $38,719 $103,680
Interest expense 3,866 5,666 11,671 16,531 71,692
----- ----- ------ ------ ------
Net interest
income 6,973 8,432 8,835 22,188 31,988
Provision for loan
losses 4,226 9,119 15,459 15,452 19,961
----- ----- ------ ------ ------
Net interest
income (expense)
after provision
for loan losses 2,747 (687) (6,624) 6,736 12,027
Investment advisory
fees 3,949 4,009 9,015 12,695 33,493
----- ----- ----- ------ ------
Total net
revenues 6,696 3,322 2,391 19,431 45,520
----- ----- ----- ------ ------
Expenses
Compensation and
benefits 2,637 3,029 4,984 9,020 21,720
Professional services 788 728 2,211 2,306 5,941
Insurance expense 778 771 740 2,313 2,207
Other general and
administrative
expenses 928 4,814 1,417 6,688 4,697
Depreciation and
amortization 1,630 1,629 2,498 4,894 7,765
Occupancy 610 569 645 1,818 1,875
Management and
incentive fee
expense to related
party 337 295 - 632 -
Cost savings
initiatives 11 28 (2) 236 325
Impairment of
intangible
assets and goodwill - 126 110,268 126 139,302
--- --- ------- --- -------
Total expenses 7,719 11,989 122,761 28,033 183,832
----- ------ ------- ------ -------
Other Income and
Gain (Loss)
Net loss on
available-for-sale
securities - - (856) (31) (4,712)
Net gain (loss) on
investments at
fair value 2,983 1,173 (13,655) 9,294 (216,121)
Net gain (loss) on
loans 539 24,876 (14,367) 31,230 (35,404)
Net (loss) gain on
derivatives (57) 2,981 (2,239) 2,520 (219,384)
Dividend income
and other net
gain (loss) (443) 152 (678) (340) (484)
Net gain on the
deconsolidation of
Market Square CLO - 29,551 - 29,551 -
--- ------ --- ------ ---
Net other income
and gain (loss) 3,022 58,733 (31,795) 72,224 (476,105)
----- ------ ------- ------ --------
Income (loss) before
income tax expense 1,999 50,066 (152,165) 63,622 (614,417)
Income tax expense 75 160 4,718 253 384
--- --- ----- --- ---
Net income (loss) 1,924 49,906 (156,883) 63,369 (614,801)
Less: Cumulative
convertible preferred
stock dividends
and accretion - - - - 2,393
--- --- --- --- -----
Net income (loss)
attributable to
common
stockholders 1,924 49,906 (156,883) 63,369 (617,194)
Net (income) loss
attributable to
noncontrolling
interest (108) 2,960 - 2,852 -
---- ----- --- ----- ---
Net income (loss)
attributable to
Deerfield Capital
Corp. $1,816 $52,866 $(156,883) $66,221 $(617,194)
====== ======= ========= ======= =========
Net income (loss)
attributable to
Deerfield Capital
Corp. per share -
basic $0.27 $7.85 $(22.81) $9.84 $(95.89)
Net income (loss)
attributable to
Deerfield Capital
Corp. per share -
diluted $0.27 $7.85 $(22.81) $9.84 $(95.89)
WEIGHTED-AVERAGE
NUMBER OF SHARES
OUTSTANDING -
BASIC 6,763,088 6,730,655 6,878,260 6,732,272 6,436,583
WEIGHTED-AVERAGE
NUMBER OF SHARES
OUTSTANDING -
DILUTED 6,763,088 6,730,655 6,878,260 6,732,272 6,436,583
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
------------------ Nine months ended
September June September September 30,
30, 30, 30, -----------------
2009 2009 2008 2009 2008
---- ---- ---- ---- ----
(In thousands, except share and per share amounts)
----------------------------------------------------
Net income (loss) $1,924 $49,906 $(156,883) $63,369 $(614,801)
Add back:
Provision for
loan losses 4,226 9,119 15,459 15,452 19,961
Cost savings
initiatives 11 28 (2) 236 325
Depreciation and
amortization 1,630 1,629 2,498 4,894 7,765
Impairment of
intangible
assets and
goodwill - 126 110,268 126 139,302
Net other income
and (gain)
loss (3,022) (58,733) 31,795 (72,224) 476,105
Income tax
expense 75 160 4,718 253 384
Noncontrolling
interest core
earnings (1) 379 3,297 - 3,676 -
--- ----- --- ----- ---
Core earnings $5,223 $5,532 $7,853 $15,782 $29,041
====== ====== ====== ======= =======
Core earnings
per share -
diluted $0.77 $0.82 $1.14 $2.34 $4.51
Weighted-average
number of shares
outstanding -
diluted 6,763,088 6,730,655 6,878,260 6,732,272 6,436,583
(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
------------------ Nine months ended
September June September September 30,
30, 30, 30, -------------
2009 2009 2008 2009 2008
---- ---- ---- ---- ----
(In thousands)
--------------
CDO management fees:
Senior fees $3,094 $2,892 $3,637 $8,924 $11,710
Subordinated fees 441 525 3,440 2,369 10,628
Performance fees 67 245 - 464 2,774
--- --- --- --- -----
Total CDO management fees 3,602 3,662 7,077 11,757 25,112
Separately managed accounts and
other 198 223 236 664 745
Other investment vehicle 149 124 - 274 -
Fixed income arbitrage investment
funds - - 1,702 - 7,636
--- --- ----- --- -----
Total investment advisory fees $3,949 $4,009 $9,015 $12,695 $33,493
====== ====== ====== ======= =======
Interest Income:
RMBS, U.S. Treasury bills and
other securities $4,418 $4,258 $6,029 $13,237 $55,837
Assets held in Market Square CLO - 3,003 4,186 6,073 13,694
Assets held in DFR MM CLO 5,951 6,226 6,781 17,997 22,024
Assets held in DPLC 162 35 - 197 -
Other corporate debt 308 576 3,510 1,215 12,125
--- --- ----- ----- ------
Total interest income 10,839 14,098 20,506 38,719 103,680
====== ====== ====== ====== =======
Interest Expense:
Recourse:
Repurchase agreements and
other short term debt $545 $605 $2,789 $1,842 $42,577
Series A and Series B notes 1,208 1,311 1,713 3,859 5,202
Trust preferred securities 1,265 1,382 1,949 4,270 6,194
----- ----- ----- ----- -----
Total recourse interest
expense 3,018 3,298 6,451 9,971 53,973
----- ----- ----- ----- ------
Non-Recourse
Market Square CLO - 1,205 2,407 2,910 8,326
DFR MM CLO 846 1,131 2,135 3,522 7,354
Wachovia Facility 2 32 678 128 2,039
--- --- --- --- -----
Total non-recourse interest
expense 848 2,368 5,220 6,560 17,719
--- ----- ----- ----- ------
Total interest expense $3,866 $5,666 $11,671 $16,531 $71,692
====== ====== ======= ======= =======
DEERFIELD CAPITAL CORP. AND ITS SUBSIDIARIES
AUM AND INVESTMENT PORTFOLIO
The following table summarizes AUM for each product category:
October 1, 2009 July 1, 2009 October 1, 2008
--------------- ------------- ---------------
Number of Number of Number of
Accounts AUM Accounts AUM Accounts AUM
-------- --- -------- --- -------- ---
(In (In (In
thousands) thousands) thousands)
--------- --------- ---------
CDOs (1) :
CLOs 12 $4,164,083 12 $4,098,226 14 $4,738,850
Asset-backed
securities 12 4,244,704 12 4,561,067 12 5,780,808
Corporate bonds 4 833,840 4 855,050 3 797,139
--- ------- --- ------- --- -------
Total CDOs 28 9,242,627 28 9,514,343 29 11,316,797
Other investment
vehicle (2) 1 22,175 1 22,106 0 -
Fixed income
arbitrage 0 - 0 - 1 330,959
Separately managed
accounts (3) 6 318,577 6 322,928 6 267,295
------- ------- -------
Total AUM (4) $9,583,379 $9,859,377 $11,915,051
========== ========== ===========
(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 October 1, 2009, July 1, 2009 and October 1, 2008,
respectively. The AUM for our Euro-denominated CDOs has been converted
into U.S. dollars using the spot rate of exchange on September 30, 2009,
June 30, 2009 and September 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 October 1, 2009 is $286.3 million related to
DFR MM CLO. Included in Total AUM for July 1, 2009 is $289.8 million
related to DFR MM CLO. Included in Total AUM for October 1, 2008 are
$294.1 million and $300.9 million related to Market Square CLO and DFR MM
CLO, respectively. 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 Deerfield Capital LLC or an affiliate thereof.
The following table summarizes the principal investing portfolio:
September 30, 2009 June 30, 2009 September 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) $316,920 49.2% $311,154 48.5% $414,502 39.5%
Corporate
leveraged
loans:
Loans held
in DFR MM
CLO (2) 286,540 44.5% 299,751 46.7% 256,818 24.5%
Loans held
in Wachovia
Facility - 0.0% 1,251 0.2% 77,676 7.4%
Other
corporate
leveraged
loans 9,053 1.4% 8,112 1.3% 32,259 3.1%
Loans held
in DPLC 14,807 2.3% 6,841 1.1% - 0.0%
Assets held
in Market
Square CLO (3) - 0.0% - 0.0% 250,082 23.8%
Commercial
real estate
loans and
securities 9,376 1.4% 9,270 1.4% 12,371 1.2%
Equity
securities 4,287 0.7% 4,780 0.7% 4,764 0.5%
Other
investments 3,362 0.5% 315 0.1% - 0.0%
----- --- --- --- --- ---
Total
Investments 644,345 100.0% 641,474 100.0% 1,048,472 100.0%
===== ===== =====
Allowance
for loan
losses (24,131) (28,589) (21,596)
------- ------- -------
Net
Investments $620,214 $612,885 $1,026,876
======== ======== ==========
(1) RMBS consists of agency RMBS with estimated fair values of
$314.0 million, $308.0 million and $394.3 million as of September 30,
2009, June 30, 2009 and September 30, 2008, respectively, and non-agency
RMBS with estimated fair values of $2.9 million, $3.1 million and
$20.2 million as of September 30, 2009, June 30, 2009 and September 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
$245.0 million, high yield corporate bonds of $2.9 million and ABS of
$2.2 million as of September 30, 2008.
SOURCE Deerfield Capital Corp.
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