PHILADELPHIA, July 15 /PRNewswire-FirstCall/ -- Alesco Financial Inc.
(NYSE: AFN), a specialty finance real estate investment trust, today
provided an update on its trust preferred securities portfolio, including
the expected impact to AFN of the seizure of IndyMac Bancorp (Pink Sheets:
IDMC.PK) ("IndyMac").
As previously disclosed, beginning in June 2008, IndyMac elected to
defer its interest payments on $125 million aggregate principal amount of
trust preferred securities held in eight collateralized debt obligation, or
"CDO," transactions in which AFN is an equity investor. As previously
announced, the IndyMac deferral triggered the over-collateralization tests
in five of these eight CDOs. The trigger of an over-collateralization test
in a CDO means that AFN, as a holder of equity securities, will no longer
receive current distributions of cash in respect of its equity interests
until sufficient cash flow is paid to senior debt holders in the CDOs to
cure the over- collateralization tests. Subsequent to the IndyMac deferral,
four additional banks elected to defer interest payments on their trust
preferred securities, which has resulted in the over-collateralization
tests being triggered in two additional CDOs in which Alesco holds equity
interests. One of the CDO over- collateralization failures has since been
cured, bringing the total number of AFN's CDOs in over-collateralization to
six as of June 30, 2008.
AFN currently expects three of the six affected CDOs to cure the
over-collateralization failures and recommence making equity distributions
within 3 to 6 quarters and the other three to do so within 20 to 35
quarters. These cashflow projections assume zero recovery of principal or
interest on any of the currently deferring or defaulted securities and no
additional deferrals. For the year ended December 31, 2007, and the quarter
ended March 31, 2008, the six affected CDOs contributed $36.2 million, or
43%, and $8.4 million, or 41%, respectively, of AFN's adjusted earnings for
such periods. The aggregate principal amount of trust preferred securities
in deferral as of June 30, 2008 is $282.3 million, representing
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