UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) August 9, 2005 (August 9, 2005)
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Anthracite Capital, Inc.
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(Exact name of registrant as specified in its charter)
Maryland 001-13937 13-397-8906
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
40 East 52nd Street, New York, New York 10022
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 810-3333
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N/A
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(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):
[ ] Written communications pursuant to Rule 425 under the Securities Act
(17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act
(17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
Item 8.01. Other Events.
Anthracite Capital, Inc. (the "Company" or "Anthracite") reported the following
results on August 9, 2005:
The Company today reported net income available to common stockholders for the
second quarter of 2005 of $0.18 per share versus a net loss to common
stockholders of $0.08 per share for the same three-month period in 2004. For
the six months ended June 30, 2005, net income available to common stockholders
was $0.45 per share compared to net income available to common stockholders of
$0.11 per share for the six months ended June 30, 2004.
Based on the $0.28 per share dividend declared on May 24, 2005, and the August
8, 2005 closing price of $11.33, Anthracite's annualized dividend yield is
9.9%. All dollar amounts discussed herein are in thousands, except per share
amounts.
Second Quarter Financial Results
Interest income from commercial real estate assets increased $7,727, or 22%
from the quarter ended June 30, 2004, which includes interest income of $752
related to the increase in expected yields on the Company's commercial
mortgage-backed security ("CMBS") interest-only securities ("IOs"). Interest
income from residential mortgage-backed securities ("RMBS") declined $2,695, or
50% from the quarter ended June 30, 2004. The repositioning of the Company's
portfolio into commercial real estate assets from RMBS was the primary factor
causing the change in the revenue mix.
The Company's weighted average cost of funds increased to 5.31% at June 30,
2005 from 4.43% at June 30, 2004. For the quarter ended June 30, 2005, hedging
expenses not related to collateralized debt obligations ("CDOs") were $1,626
($0.03 per share), a decrease from $3,148 ($0.06 per share) for the quarter
ended June 30, 2004 and $2,300 ($0.04 per share) for the quarter ended March
31, 2005. The $1,522 decrease in hedging expense from the second quarter of
2004 is primarily attributable to the removal of interest rate swaps due to the
issuance of fixed rate liabilities for the Company's fourth collateralized debt
obligation ("CDO HY1") in the fourth quarter of 2004. The Company's estimated
exposure at June 30, 2005 to a 50 basis point move in short-term interest rates
decreased slightly to $0.011 per share annually from $0.012 per share annually
at March 31, 2005.
The Company's debt to capital ratio at June 30, 2005 decreased slightly from
6.2:1 at December 31, 2004 to 6.1:1 at June 30, 2005, and the recourse debt to
capital ratio increased from 1.6:1 to 1.8:1 over the same period. The increase
in the Company's recourse debt to capital ratio is primarily attributable to
financing associated with the purchase of multi-family agency securities as
well as asset accumulation in anticipation of the issuance of the Company's
fifth CDO in July 2005.
The net interest margin of 3.1% for the second quarter of 2005 decreased
slightly from 3.3% for the second quarter of 2004.
In 2001, the Company adopted Emerging Issues Task Force Issue 99-20,
"Recognition of Interest Income and Impairment on Purchased and Retained
Beneficial Interests in Securitized Financial Assets" ("EITF 99-20"). The
Company is required to update its estimated cash flows for securities subject
to EITF 99-20. The Company compares the yields resulting from the updated cash
flows to the current GAAP yields. An impairment charge is required under EITF
99-20 if the updated yield is lower than the current GAAP yield and the
security has a market value less than its adjusted purchase price. The Company
carries all these securities at their market value on its consolidated
statement of financial condition.
During the second quarter of 2005, the Company increased its underlying loan
loss expectations on a 1998 vintage CMBS transaction, resulting in an
impairment charge of $3,072 on one of the Company's below investment grade
securities. This CMBS transaction has two underlying mortgage loans secured by
assisted living facilities located in Texas that are performing below
management's original expectations. The Company anticipates that these mortgage
loans will be resolved in the third quarter of 2005. Based on management's
current estimate of the amount recoverable from the resolution of the loans, an
impairment charge was recorded in the second quarter. The actual loss may be
less than or exceed the amount recorded in the second quarter depending upon
final the resolution of these assets.
Commercial Real Estate Credit Risk
The Company's primary focus is to invest in a diversified portfolio of CMBS and
commercial real estate loans. The majority of these investments take the form
of CMBS that are collateralized by pools of underlying mortgage loans. The
underlying loans are secured by first mortgages on office buildings, retail
centers, apartment buildings, hotels and other types of commercial properties.
The cash flows the Company receives from its CMBS portfolio are dependent upon
the credit performance of the underlying mortgage loans. The Company assumes
losses will occur on the underlying mortgage loans and the yield the Company
accrues on its CMBS securities reflects these assumed losses. Loss assumptions
are maintained at a level believed by management to be sufficient to absorb
estimated credit losses inherent in the underlying mortgages.
The Company considers CMBS securities where it maintains the right to control
the foreclosure/workout process on the underlying loans as controlling class
CMBS ("Controlling Class CMBS"). The Company acquired two Controlling Class
CMBS transactions during the second quarter of 2005 and owns 18 Controlling
Class CMBS transactions as of June 30, 2005. However, the non-rated tranches of
ten of the 18 transactions are included in CDO HY1 which reduces the Company's
exposure to the credit risk in these transactions.
The current principal balance underlying the Company's 18 Controlling Class
CMBS is $21,294,624. Delinquencies of 30 days or more as a percent of current
loan balances were 0.96% at the end of the second quarter of 2005, compared
with 1.28% at the end of the first quarter of 2005. With the disposition of
four loans during the second quarter of 2005, the weighted average loss
severity experienced for the 1998 and 1999 Controlling Class CMBS decreased
from 25.7% at March 31, 2005 to 24.0% at June 30, 2005. No losses have been
realized for those Controlling Class CMBS with vintages from 2001 through 2005
and the Company does not own any 2000 vintage Controlling Class CMBS. During
the second quarter of 2005, there were credit upgrades on three of the
Company's Controlling Class CMBS and no credit downgrades.
Commercial Real Estate Securities
During the second quarter of 2005, the Company purchased $301,846 of commercial
real estate securities, of which $147,764 were multi-family agency securities.
The Company's commercial real estate securities portfolio increased by
approximately 22% from an estimated fair value of $1,624,007 at March 31, 2005
compared with $1,979,779 at June 30, 2005. The average yields on the Company's
commercial real estate securities for the second quarters of 2005 and 2004,
respectively, were as follows:
For the quarter ended
June 30,
2005 2004
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Investment grade commercial real estate securities 6.5% 6.1%
Non-investment grade CMBS securities 10.6% 9.8%
All commercial real estate securities 8.5% 8.0%
The average cost of financing the commercial real estate securities portfolio
during the second quarter of 2005 was 5.5%, compared to 5.2% for the second
quarter of 2004.
Net interest income and unrealized losses from the commercial real estate
securities portfolio for the quarters ended June 30, 2005 and 2004,
respectively, are as follows:
For the quarter ended
June 30,
2005 2004
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Interest income $33,602 $30,166
Interest expense* (19,395) (16,792)
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Unrealized gains (474) -
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Net interest income and unrealized losses from
commercial real estate securities $13,733 $13,374
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*Including hedges in the Company's CDOs.
Commercial Real Estate Loans
During the quarter ended June 30, 2005, the Company experienced repayments of
$45,222 related to its U.S. dollar denominated commercial real estate loan
portfolio.
Additionally, during the quarter ended June 30, 2005, the Company purchased a
commercial real estate loan secured by apartment buildings located throughout
Germany. The loan is denominated in Euros and has a stated face of
(euro)25,000. The acquisition of this loan brings total European commercial
real estate loans to $49,935 as of June 30, 2005, up from $19,748 as of March
31, 2005. The Company finances these loans by borrowing in the applicable
currency and hedging the un-financed portion. The carrying value and average
yields on the Company's commercial real estate loans, exclusive of the
Company's investments in Carbon Capital, Inc. and Carbon Capital II, Inc.
(collectively, the "Carbon Capital Funds"), as of June 30, 2005 were as
follows:
Average Average Average
Spread to Spread to Spread to
Carrying Average 1-month 3-month 3-month
Value Yield USD LIBOR GBP LIBOR EURIBOR
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Fixed Rate $89,111 9.71%
Floating Rate 82,885 5.48%
Floating Rate 19,671 6.00%
Floating Rate 30,264 4.00%
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$221,931
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For the three months ended June 31, 2005 and 2004, the total cost of borrowings
secured by loan assets was 4.5% and 2.7%, respectively. The Company has three
committed warehouse lines that can be used to finance these commercial loan
assets. The Company's investments in the Carbon Capital Funds are included in
commercial real estate loans. The annualized yield on the Company's investments
in the Carbon Capital Funds was 18.8% for the quarter ended June 30, 2005. The
Company's investments in the Carbon Capital Funds as of June 30, 2005 were
$60,472 as compared to $56,812 as of December 31, 2004.
Net interest income from the commercial real estate loan portfolio for the
quarters ended June 30, 2005 and 2004, respectively, is as follows:
For the quarter ended June 30,
2005 2004
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Interest income $7,961 $ 4,140
Interest expense (1,275) (145)
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Net interest income from commercial real
estate loans $6,686 $ 3,995
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Book Value
Net book value per share at the end of the second quarter of 2005 was $9.22.
This is an increase of 6.2% from $8.68 at March 31, 2005 and is reflective of
lower interest rates, credit upgrades and generally tighter credit spreads.
During the quarter, Ten-Year Treasury interest rates decreased by 56 basis
points.
Fifth Collateralized Debt Offering ("CDO HY2")
As previously reported, on July 26, 2005, the Company closed CDO HY2, a
$249,500 offering. This transaction provides match funding for a portfolio of
CMBS and unsecured real estate investment trust ("REIT") debt with a total par
of $478,000. The portfolio includes two CMBS transactions that closed just
prior to the CDO and a ramp facility that will finance up to $100,000 of
additional par of CMBS to be acquired over a nine-month ramp period. The ramp
facility is structured to provide financing for the same type of high yield
CMBS investments.
The Company will initially record the transaction as a secured financing for
accounting purposes and will consolidate the assets, liabilities, income and
expense of the CDO issuer. In the event of a sale of the floating rate CDO debt
security retained by the Company, the transaction would be recorded as a sale
for accounting purposes and the assets, liabilities, income and expense of the
CDO issuer would no longer be consolidated.
Once the ramp facility has been fully funded, the Company estimates the value
of the transaction will be $351,000, consisting of net cash of $244,000 and the
retained non-investment grade debt and the preferred shares with a fair market
value of $107,000 in exchange for the portfolio of CMBS and REIT debt. The
adjusted purchase price of the CMBS and REIT debt, excluding the assets to be
contributed to the ramp facility, is approximately $267,000 and the estimated
fair value of these securities is $274,000.
Dividend Reinvestment Plan
The Company's Dividend Reinvestment and Stock Purchase Plan (the "Plan") has
been reinstated for all investment dates after July 26, 2005 with a discount of
2% to the trailing 12-business day average provided the stock price remains
above threshold levels established by the Company at the time. The dividend
reinvestment portion of the Plan remains in effect with a discount of 2% as
well.
To request a prospectus and receive enrollment materials or to ask questions
about the Plan, interested investors and stockholders may contact the Company's
transfer agent, American Stock Transfer & Trust Company, at 1-877-248-6416, or
Investor Relations, Anthracite Capital, Inc., at 212-810-3333. The Company's
website address is www.anthracitecapital.com.
About Anthracite
Anthracite Capital, Inc. is a specialty finance company focused on investments
in high yield commercial real estate loans and related securities. Anthracite
is externally managed by BlackRock Financial Management, Inc., which is a
subsidiary of BlackRock, Inc. ("BlackRock") (NYSE:BLK), one of the largest
publicly traded investment management firms in the United States with
approximately $414.4 billion in global assets under management as of June 30,
2005. BlackRock Realty Advisors, Inc., another subsidiary of BlackRock,
provides real estate equity and other real estate-related products and services
in a variety of strategies to meet the needs of institutional investors.
BlackRock is a member of The PNC Financial Services Group, Inc. ("PNC")
(NYSE:PNC), a diversified financial services organization. Through its
affiliates, PNC originates commercial, multifamily and residential real estate
loans, and services $118.8 billion in commercial mortgage loans for third
parties through its Midland Loan Services, Inc. subsidiary as of June 30, 2005.
Forward Looking Statements
This press release may contain forward-looking statements within the meaning of
the Private Securities Litigation Reform Act with respect to future financial
or business performance, strategies or expectations. Forward-looking statements
are typically identified by words or phrases such as "trend," "potential,"
"opportunity," "pipeline," "believe," "comfortable," "expect," "anticipate,"
"current," "intention," "estimate," "position," "assume," "outlook,"
"continue," "remain," "maintain," "sustain," "seek," "achieve," and similar
expressions, or future or conditional verbs such as "will," "would," "should,"
"could," "may" or similar expressions. Anthracite cautions that forward-looking
statements are subject to numerous assumptions, risks and uncertainties, which
change over time. Forward-looking statements speak only as of the date they are
made, and Anthracite assumes no duty to and does not undertake to update
forward-looking statements. Actual results could differ materially from those
anticipated in forward-looking statements and future results could differ
materially from historical performance.
In addition to factors previously disclosed in Anthracite's Securities and
Exchange Commission (the "SEC") reports and those identified elsewhere in this
press release, the following factors, among others, could cause actual results
to differ materially from forward-looking statements or historical performance:
(1) the introduction, withdrawal, success and timing of business initiatives
and strategies; (2) changes in political, economic or industry conditions, the
interest rate environment or financial and capital markets, which could result
in changes in the value of Anthracite's assets; (3) the relative and absolute
investment performance and operations of Anthracite's manager; (4) the impact
of increased competition; (5) the impact of capital improvement projects; (6)
the impact of future acquisitions and divestitures; (7) the unfavorable
resolution of legal proceedings; (8) the extent and timing of any share
repurchases; (9) the impact, extent and timing of technological changes and the
adequacy of intellectual property protection; (10) the impact of legislative
and regulatory actions and reforms and regulatory, supervisory or enforcement
actions of government agencies relating to Anthracite, BlackRock or PNC; (11)
terrorist activities, which may adversely affect the general economy, real
estate, financial and capital markets, specific industries, and Anthracite and
BlackRock; (12) the ability of Anthracite's manager to attract and retain
highly talented professionals; (13) fluctuations in foreign currency exchange
rates; and (14) the impact of changes to tax legislation and, generally, the
tax position of the Company.
Anthracite's Annual Report on Form 10-K for the year ended December 31, 2004
and Anthracite's subsequent reports filed with the SEC, accessible on the SEC's
website at www.sec.gov, identify additional factors that can affect
forward-looking statements.
The Company is filing the Anthracite Capital, Inc. Consolidated Statements
of Financial Condition and Consolidated Statements of Operations as Exhibit
99.1.
Item 2.02. Results of Operations and Financial Condition.
On August 9, 2005, Anthracite Capital, Inc. issued a press release announcing
its earnings for the fiscal quarter ended June 30, 2005, which it is furnishing
under this Item 2.02 as Exhibit 99.2.
Item 9.01. Financial Statements and Exhibits
(c) Exhibits.
99.1 Anthracite Capital, Inc., Consolidated Statements of Financial
Condition and Consolidated Statements of Operation.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
ANTHRACITE CAPITAL, INC.
By: /s/ James J. Lillis
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Name: James J. Lillis
Title: Chief Financial Officer
Dated: August 9, 2005
ANTHRACITE CAPITAL, INC.
CURRENT REPORT ON FORM 8-K
Report dated August 9, 2005 (August 9, 2005)
EXHIBIT INDEX
Exhibit No. Description
99.1 Anthracite Capital, Inc., Consolidated Statements of
Financial Condition and Consolidated Statements of Operation.
99.2 Press Release issued by Anthracite Capital, Inc., dated
August 9, 2005.