HCM Needs Capital Infusion to Survive 4Q Crisis
Hanover Capital Mortgage Holdings, an "A" paper mortgage investing REIT, lost $37.7 million in the fourth quarter and signaled that it may not continue as a going concern unless it receives a capital infusion.
It blamed its problems on market conditions, which led to "significant" writedowns on its mortgage holdings.
"Additional sources of capital are required for the company to generate positive cash flow and continue operations beyond 2008," the REIT said a statement.
For the year, Hanover lost $80 million in 2007, compared to a slight loss for the prior year.
Hanover Capital invests in prime mortgage securities and in mortgage loans on a financially leveraged basis.
Its portfolio of investments includes subordinated MBS tranches, whose value has slipped greatly over the past year.
As expected, Hanover, since it had no income, did not declare a fourth-quarter dividend.
Hanover noted that while it has "sufficient cash to continue operations" until early August, it "does not have sufficient funds to repay the outstanding principal" on its borrowing facility.
The company has hired Keefe, Bruyette & Woods to help it find capital sources. "Although no formal agreements have been reached, the company is in discussions with several potential investors," it said. (c) 2008 Mortgage Servicing News and SourceMedia, Inc. All Rights Reserved. http://www.mortgageservicingnews.com/ http://www.sourcemedia.com/