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) November 3, 2005 (November 3, 2005)
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 of (Commission (IRS Employer
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 2.02. Results of Operations and Financial Condition.
On November 3, 2005, Anthracite Capital, Inc. issued a press release
announcing its earnings for the fiscal quarter ended September 30, 2005, which
it is furnishing under this Item 2.02 as Exhibit 99.2.
Item 8.01. Other Events.
Anthracite Capital, Inc. (the "Company" or "Anthracite") reported the following
results on August 9, 2005:
The Company today reported diluted net income available to common stockholders
for the third quarter of 2005 of $0.28 per share versus net income to common
stockholders of $0.28 per share for the same three-month period in 2004. For
the nine months ended September 30, 2005 and 2004, diluted net income
available to common stockholders was $0.73 and $0.41 per share, respectively.
Based on the $0.28 per share dividend declared on September 14, 2005, and the
November 2, 2005 closing price of $10.89, Anthracite's annualized dividend
yield is 10.28%. All dollar amounts discussed herein are in thousands, except
share and per share amounts.
Chris Milner, Chief Executive Officer of the Company, stated, "While the
investment markets are increasingly competitive, we continue to identify
attractive opportunities to deploy capital both in the US and in Europe. As a
result, the Company achieved solid commercial real estate portfolio growth of
14% on the year despite high prepayment activity. Our debt and equity issuance
during the quarter also allowed the Company to capitalize on the substantial
amounts of liquidity in the market."
Third Quarter Financial Results
Interest income from commercial real estate assets increased $7,403, or 19%
from the quarter ended September 30, 2004. The Company's commercial real
estate assets have increased 14% year-to-date with an estimated fair value of
$3,721,156 at September 30, 2005 compared with $3,265,914 at December 31,
2004.
The Company's weighted average cost of funds increased to 5.6% at September
30, 2005 from 5.1% at September 30, 2004. For the quarter ended September 30,
2005, hedging expenses not related to collateralized debt obligations ("CDOs")
were $1,588 ($0.03 per share), a decrease from $3,825 ($0.07 per share) for
the quarter ended September 30, 2004. The $2,237 decrease in hedging expense
from the third 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 CDO ("CDO HY1") in the fourth quarter of 2004 and the
Company's fifth CDO ("CDO HY2") in the third quarter of 2005. The Company's
estimated exposure at September 30, 2005 to a 50 basis point move in
short-term interest rates remained at $0.01 per share annually.
The Company's debt to capital ratio remained at 6.2:1 as of September 30, 2005
and December 31, 2004, and the recourse debt to capital ratio increased
slightly to 1.7 from 1.6:1 over the same period.
Capital Markets Activity
On July 26, 2005, the Company closed CDO HY2 and issued non-recourse
liabilities with a face amount of $365,010. Senior investment grade notes with
a face amount of $240,134 were issued and sold in a private placement. The
Company retained the floating rate BBB- note, the below investment grade notes
and the preferred shares. The CDO HY2 transaction provides match-funding for a
portfolio of commercial mortgage-backed securities ("CMBS") and unsecured real
estate investment trust ("REIT") debt with a total par of $478,050.
CDO HY2 included a $100,000 ramp facility that was fully funded on October 13,
2005. Since July 26, 2005, the $100,000 ramp facility has been invested at
short-term money market rates. The $100,000 ramp facility and ramp collateral
contributed during the third quarter of 2005 generated interest income of $690
for the third quarter. If the ramp facility had been fully funded with
subordinated CMBS since the beginning of the quarter, interest income from
ramp collateral would have been approximately $1,317 for the third quarter.
The completion of the ramp facility provided the Company with $41,225 of
additional liquidity.
The Company estimates the value of the transaction to be $351,000, consisting
of cash of $244,000 and retained non-investment grade debt and preferred
shares with a fair market value of $107,000 in exchange for a portfolio of
CMBS and REIT debt. The adjusted purchase price of the CMBS and REIT debt is
approximately $326,000. The Company has recorded CDO HY2 as a secured
financing for accounting purposes and consolidated the assets, liabilities,
income and expense of the CDO issuer. In the event of a sale of the floating
rate BBB- note retained by the Company, the transaction will be recorded as a
sale for accounting purposes and the assets, liabilities, income and expense
of CDO HY2 will no longer be consolidated.
On August 18, 2005, the Company completed a secondary stock offering of
1,725,000 shares at a price of $11.59, which included a 15% over-allotment
option exercised by the underwriter. Net proceeds were $19,199.
On September 26, 2005, the Company issued $75,000 of trust preferred
securities through its wholly owned subsidiary, Anthracite Capital Trust I.
The trust preferred securities have a thirty-year term ending October 30, 2035
with interest at a fixed rate of 7.497% for the first ten years and at a
floating rate of three-month LIBOR plus 2.9% thereafter. The trust preferred
securities can be redeemed at par beginning in October 2010.
The additional liquidity generated by the aforementioned three transactions
will be used by the Company to continue to execute its commercial real estate
strategies including, for the first time, investments in commercial real
estate equity.
Richard Shea, President and Chief Operating Officer of the Company, stated,
"During the third quarter we raised over $330,000 of capital in both the debt
and equity markets. With rising short-term rates, we have been issuing
long-dated debt and trust preferred securities to strengthen our balance sheet
and to provide solid long-term earnings potential. A substantial portion of
our portfolio is match-funded, leaving minimal exposure to rising short and
long-term rates. Our disciplined investment process remains a primary
component of the strong reputation we have built for consistent performance.
This reputation continues to create opportunities for the Company to issue
attractively priced capital in financial markets throughout the world."
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
interest income the Company records for 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 third quarter of 2005 and owns 20 Controlling
Class CMBS transactions as of September 30, 2005. However, portions of the
non-rated tranches of 16 of the 20 transactions are included in CDOs which
reduces the Company's exposure to the credit risk in these transactions.
The current principal balance of the loans underlying the Company's 20
Controlling Class CMBS is $25,109,561. Delinquencies of 30 days or more on
these loans as a percent of current loan balances were 0.75% at the end of the
third quarter of 2005, compared with 0.96% at the end of the second quarter of
2005. With the disposition of five loans during the third quarter of 2005, the
weighted average loss severity experienced for the 1998 and 1999 Controlling
Class CMBS decreased from 24.0% at June 30, 2005 to 23.0% at September 30,
2005. As of September 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 third quarter
of 2005, there was a credit upgrade on one of the Company's Controlling Class
CMBS and no credit downgrades.
Commercial Real Estate Securities
During the third quarter of 2005, the Company purchased $140,329 of commercial
real estate securities, of which $44,559 were multi-family agency securities.
The Company's commercial real estate securities portfolio increased by
approximately 5% to an estimated fair value of $2,070,725 at September 30,
2005, compared with $1,979,779 at June 30, 2005. The average yields on the
Company's commercial real estate securities for the third quarters of 2005 and
2004 were as follows:
For the quarter ended
September 30,
2005 2004
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Investment grade commercial real estate securities 5.7% 6.4%
Non-investment grade CMBS securities 10.6% 9.4%
All commercial real estate securities 8.0% 8.0%
The average cost of financing the commercial real estate securities portfolio
during the third quarter of 2005 was 5.5%, compared to 5.1% for the third
quarter of 2004.
Interest income and net realized and unrealized gain from the commercial real
estate securities portfolio for the quarters ended September 30, 2005 and 2004
are as follows:
For the quarter ended
September 30,
2005 2004
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Interest income $37,009 $32,408
Interest expense* (24,129) (18,107)
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Net realized and unrealized gain 251 1,586
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Net interest income and gain from commercial real estate $13,131 $15,887
securities
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*Including hedges in the Company's CDOs.
Commercial Real Estate Loans
During the quarter ended September 30, 2005, the Company experienced
repayments of $12,388 related to its U.S. dollar denominated commercial real
estate loan portfolio.
Additionally, during the quarter ended September 30, 2005, the Company
purchased three U.S. dollar denominated commercial real estate loans with a
total stated face of $86,287. The acquisition of these loans brings total
commercial real estate loans to $353,402 as of September 30, 2005, up from
$282,461 at June 30, 2005. Additionally, during October 2005, the Company
acquired a commercial real estate loan with a cost of (pound)22,374 (or
$39,524). 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 September 30, 2005 were as follows:
Carrying Carrying Average Average Average Average Average
Value (Local Spread to Spread to Spread to Spread to
Currency) 1-month USD 3-month GBP 3-month
10-Year Value Yield LIBOR LIBOR EURIBOR Treasury
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Fixed Rate $89,085 9.71%
Floating Rate 124,098 5.29%
Floating Rate 19,600 (pound)11,082 6.00%
Floating Rate 30,223 (euro)25,041 4.00%
Floating Rate 32,957 4.25%
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$295,963
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For the three months ended September 30, 2005 and 2004, the total cost of
borrowings secured by loan assets was 4.9% and 3.3%, 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 20.1% for the quarter
ended September 30, 2005. The Company's investments in the Carbon Capital
Funds as of September 30, 2005 were $59,325 as compared to $56,812 as of
December 31, 2004.
Net interest income from the commercial real estate loan portfolio for the
quarters ended September 30, 2005 and 2004 is as follows:
For the quarter ended
September 30,
2005 2004
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Interest income $8,232 $ 5,123
Interest expense (1,273) (424)
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Net interest income from commercial real estate $6,959 $ 4,699
loans
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Book Value
Net book value per share at the end of the third quarter of 2005 was $9.31.
This is an increase of 1.0% from $9.22 at June 30, 2005 and an increase of
8.3% from $8.60 at December 31, 2004.
Dividend Reinvestment Plan
The optional cash portion of 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 $428 billion in global assets under management as of September
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 $127 billion in commercial mortgage loans for third
parties through its Midland Loan Services, Inc. subsidiary as of September 30,
2005.
Forward Looking Statements
This 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.
To learn more about Anthracite, visit our website at
www.anthracitecapital.com. The information contained on the Company's website
is not a part of this release.
The Company is filing the Anthracite Capital, Inc. Consolidated Statements of
Financial Condition and Consolidated Statements of Operations as Exhibit 99.1.
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: November 3, 2005
ANTHRACITE CAPITAL, INC.
CURRENT REPORT ON FORM 8-K
Report dated November 3, 2005 (November 3, 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 November 3, 2005.