cre loans

The CRE's are the major variable in this whole thing.

The property has gone down a bit but probably not more than 10% at worst.

The CRE's have gone down 10% which was aboout $30-40m as at 31 December 2007.

The CRE funding mechanisem is the achilies heel of this. It is a revolving line of credit which expires in about 2 years. The repayment of the loan would be close to covered by the loans maturing and being paid back together with the funds accumulated from witholding distributions for 2 years. In other words if absolutly nothing goes wrong they will probably be able to pay the CRE facility off or close to it when it is due.

Problem is everthing has been going wrong (declining CRE values) and more things can go wrong.
- CS can cancell the loan on 364 day notice
- It works like a margin facilty
- CS will lend up to 55% of the market value of the CRE's
- CS value these loans on monthly stops
- To December CS market these loans down by 30M
- REU had to repay CS 55% of 30m on three day notice
- This drew down REU's corporate facility close to max.
- REU would struggle to meet another margin call by CS
- No margin pay by REU would allow CS to sell some loans
- The next CS market valuation may contain a margin call

What could go right?
- BNB is not yet insolvent
- BNB could meet a margin call and save REU
- No one will save REU for free BNB get a big discount
- The CRE loans are collected as they mauture

Rubicon
- No one will save REU with Rubicon in control. Does not make sense.
- Fell can either reliquish management for a small payment or manage the trusts as they start a fire sale.

The only good thing is that the planned firesale will dramatically reduce Rubicons profitability anyhow so Rubicon may be worth much less anyhow.

I have yet to hear Dr Fell, or Rubicon, accept any responsibility for this mess.

I think he will have a decision time very soon;
- Relinquish control to facitate REU refinancing
- Let REU and RAT fall into recivership

Time will tell.

Time will tell if they do the honourable thing.

The other posibility is that the trust will survive without a change in control. Who knows.