The effective price for the $849 million portfolio was equal to its fair value as of June 30. MuniMae eliminated $799 million of debt and preferred equity obligations with the sale and received $79 million in cash, it noted in an associated press release.
"We believe the steps we have announced today are important for our company and our shareholders for several reasons," said Michael Falcone, MuniMae's CEO. "We have disclosed for some time that we were concerned about rising interest rates, and this transaction greatly reduces our exposure to rising rates. For a variety of reasons, the buyer is currently better able than we are to own and manage these assets in both a rising and a volatile interest rate environment.
“We have retained the participating and defaulted bonds because we believe that with these bonds the benefits of our intensive asset management will more than offset the risks associated with rising rates. We believe there are attractive opportunities to redeploy the capital we have generated, such as buying back more of our outstanding debt, reinvesting in our real estate asset management business or purchasing shares under an expanded share buyback plan."
The 8-K filing stated MuniMae is keeping $147 million of “not fully performing” assets.
In a related move, on Friday MuniMae is converting from a publicly traded partnership to a corporation. It will no longer pass through income to shareholders and issue tax reports on Schedule K-1 going forward. The move, said Falcone, should allow for a wider group of investors to purchase its stock.