Using Veritas to Construct the "Per…

29-04-2017 Hits:88589 BoomBustBlog Reggie Middleton

Using Veritas to Construct the "Perfect" Digital Investment Portfolio" & How to Value "Hard to Value" tokens, Pt 1

The golden grail of investing is to find that investable asset that provides the greatest reward with the least risk. Alas, despite how commonsensical that precept seems to be, many...

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The Veritas 2017 Token Offering Summary …

15-04-2017 Hits:82272 BoomBustBlog Reggie Middleton

The Veritas 2017 Token Offering Summary Available For Download and Sharing

The Veritas Offering Summary is now available for download, which packs all the information about Veritas in a single page. A step by step guide to purchasing Veritas can be downloaded here.

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What Happens When the Fund Fee Fight Hit…

10-04-2017 Hits:82164 BoomBustBlog Reggie Middleton

What Happens When the Fund Fee Fight Hits the Blockchain

A hedge fund recently made news by securitizing its LP units as Ethereum-based tokens and selling them as tradeable (thereby liquid) assets. This brings technology to the VC industry that...

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Veritaseum: The ICO That's Ushering in t…

07-04-2017 Hits:86659 BoomBustBlog Reggie Middleton

Veritaseum: The ICO That's Ushering in the Era of P2P Capital Markets

Veritaseum is in the process of building peer-to-peer capital markets that enable financial and value market participants to deal directly with each other on a counterparty risk-free basis in lieu...

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This Is Ground Zero for the 2017 Veritas…

03-04-2017 Hits:83092 BoomBustBlog Reggie Middleton

This Is Ground Zero for the 2017 Veritas Offering. Are You Ready to Get Your Key to the P2P Capital Markets?

This is the link to the Veritas Crowdsale landing page. Here is where you will be able to buy the Veritas ICO when it is launched in mid-April. Below, please...

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What is the Value Proposition For Verita…

01-04-2017 Hits:85212 BoomBustBlog Reggie Middleton

What is the Value Proposition For Veritas, Veritaseum's Software Token?

 A YouTube commenter asked a very good question that we will like to take some time to answer. The question was, verbatim: I've watched your video and gone through the slides. The exchange...

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This Real Estate Bubble, Like Some Relat…

28-03-2017 Hits:56317 BoomBustBlog Reggie Middleton

This Real Estate Bubble, Like Some Relationships, Is Complicated...

CNBC reports US home prices rise 5.9 percent to 31-month high in January according to S&P CoreLogic Case-Shiller. This puts the 20 city index close to an all time high, including...

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Bloomberg Chimes In With My Warnings As …

28-03-2017 Hits:84543 BoomBustBlog Reggie Middleton

Bloomberg Chimes In With My Warnings As Landlords Offer First Time Ever Concessions to Retail Renters

Over the last quarter I've been warning about the significant weakness in retailers and the retail real estate that most occupy (links supplied below). Now, Bloomberg reports: Manhattan Landlords Are Offering...

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Our Apple Analysis This Week - This Comp…

27-03-2017 Hits:84248 BoomBustBlog Reggie Middleton

Our Apple Analysis This Week - This Company Is Not What Most Think It IS

We will releasing our Apple forensic analysis and valuation this week for subscribers (click here to subscribe - lowest tier is the same as a Netflix subscription). As can be...

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The Country's First Newly Elected Lame D…

27-03-2017 Hits:84110 BoomBustBlog Reggie Middleton

The Country's First Newly Elected Lame Duck President Will Cause Massive Reversal Of Speculative Gains

Note: Subscribers should reference  the paywall material here for stocks that should give a good risk/reward scenario for bearish trades. The Trump administration's legislative outlook is effectively a political desert, with...

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Sears Finally Throws In The Towel Exactl…

22-03-2017 Hits:90600 BoomBustBlog Reggie Middleton

Sears Finally Throws In The Towel Exactly When I Predicted "has ‘substantial doubt’ about its future"

My prediction of Sears collapsing once interest rates started ticking upwards was absolutely on point.

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The Transformation of Television in Amer…

21-03-2017 Hits:88176 BoomBustBlog Reggie Middleton

The Transformation of Television in America and Worldwide

TV has changed more in the past 10 years than it has since it's inception nearly 100 years ago This change is profound, and the primary benefactors look and act...

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I am sharing with you some of the key observations on KKR Financial Holdings (KFN), company that I had a short position in, but was covered some time ago. I would appreciate any info or insight that my readers may have on this company. I initially saw this company as the next Carlyle Capital or Peloton Holdings. In order to put on another position at these levels, I would have to assume a total equity wipeout , as was witnessed in the two aforementioned companies. We shall see...

 On December 31, 2007, KFN's economic book value per share was $14.62 and fair value per share was $16.06. As of March 06, 2008, when the company held a conference call with the analysts, it highlighted that both economic book value and fair value per share are broadly in the range of on the low side, $13.50 per share, and on the high side, $14.50 per share.

Liquidity

On the liquidity front, at the end of December 31, 2007, KFN had $1.04 billion of available liquidity which included unrestricted cash and cash equivalents of $524.1 million, restricted cash available for investment worth $430.1 million and restricted cash available for debt service amounting to $85.5 million. As of March 06, 2008, it had free cash and cash equivalents approximating $400 million and restricted cash available for investment of just under $500 million. $100 million worth of liquidity lost in two months!

In terms funding capacity, KFN mentioned that it currently has $1.8 billion of capacity available under the non-recourse secure transaction executed in November 2007, $340 million available under secured credit facility, and an additional EUR800 million. However, in a recent filing with the SEC, KFN asked for more time to make payments to holders of the non-recourse secured liquidity notes that were issued by two of its asset-backed conduit facilities. This isn't the first time the company has run into trouble. Last year, it said the credit market turmoil was weighing on its ability to make payments on some of its asset-backed commercial paper. In October 2007, the company reached a pact to extend the maturity date of the secured liquidity notes so that roughly half of the principal was due on February 15, 2008 and the rest on March 13, 2008.

Note: Several people have brought up what appears to be an oversight in this posting. See the following:

There's one flaw in your argument => they've already written down on their ABS/residential assets to zero (whatever they haven't sold) and thus have no economic interest in them.  The negotiations over the previous default with commerical paper holders has to due with non-recourse debt and thus does not impact KFN.  When you securize assets off you balance via a CDO and keep the equity, FIN 46 mandates you place the CDO notes on your balance sheet even though you've "sold it".  

 

Repo agreements with "Investment Banks"

KFN also mentioned that it has large warehouses which are structured as repo agreements with Goldman Sachs, Citigroup, J P Morgan Chase and Morgan Stanley.

Credit exposure to RMBS

Asset Backed Commercial Paper (ABCP) where they took a charge of $243 million for discontinued operations. That has underlying in it assets that are in excess of $3.5 billion. Apart from this, as of December 31, KFN held approximately $337 million of residential mortgage backed securities. These were AA to unrated pieces of which, approximately $288 million was rated investment grade and just under $50 million was below investment grade. They mentioned that these securities were the remnants of the whole loans that KFN bought from Wells Fargo and First Republic securitized with most of them being originated in 2004 and 2005 (FICO in the 730ish range and LTV's of 65-66). The cumulative static pool net losses on the underlying $10.5 billion of mortgages at the end of December 31, 2007 were 1.9 to 2 basis points. However, it may have gone up significantly with the worsening of the crisis and widening credit spreads.

The CEO had the following comment on the business in 2008: We had January was the second worst month in loan history after July of last year and then February came right after it and was the third worst figure in loan history.

I did not have enough time to go through the company's 10K and see if there are some discrepancies that can be looked into, but will follow up in a few days.