re: Ann: MFNHA - Suspension from Official Quo...
Daleg
MFNHA was my main investment so naturally very happy with the outcome. It was always likely to realise a substantial premium to the subdued share price over time in my view, but there was a risk that we could have been stuck for a couple more years. Repayments would have slowed down significantly now that US rates are likely to stay near nil for the next 2 years.
I have had a close look at MXQ, particularly after the Gosford loans were repaid. I think it is very different to MFNHA and I don't like it for the following reasons, but I would appreciate it if you can outline where my analysis is wrong:
1. Interest accruing to the lenders is greater than the interest on the investments. The deferred margin is quite punative, will gradually reduce NTA (vs gradual benefit for MFNHA through positive cashflow)
2. Some of the good assets are illiquid and have a long tail - likely to realise a decent price vs book, but could take up to 5 plus years for some assets. MFNHA assets were all liquid, evidenced by sale of the entire portfolio in 5 days in difficult market conditions
3. Quite a few assets which look ugly, eg the CDOs - may not be able to get book. MFNHA assets were senior loans trading near face value (other than when the market was completely dislocated)
4. Rights of the unitholders vs debt holders unclear - could debtholders force asset sales in due course to get repaid if the assets are not producing enough income to service the debt?
5. Tax implications are a little murky
I would appreciate your feedback and how you got comfortable with these issues.
Just my opinion Monty
MFN Price at posting:
0.0¢ Sentiment: Hold Disclosure: Held
