CHICAGO, Aug. 10 /PRNewswire-FirstCall/ -- Deerfield Capital Corp.
(NYSE AMEX: DFR) ("DFR" or the "Company") today announced the
results of operations for its second quarter ended June 30, 2009.
Second Quarter 2009 Summary -- Net income attributable to DFR for
the quarter totaled $52.9 million, or $7.85 per diluted common
share, including a gain of $29.6 million, or $4.39 per diluted
share, as a result of the deconsolidation of Market Square CLO Ltd.
("Market Square CLO"). -- Core earnings for the quarter totaled
$5.5 million, or $0.82 per diluted common share. Core earnings is a
non-GAAP financial measure which primarily reflects GAAP earnings
excluding certain non-cash and special charges and income tax
effects (see reconciliation of non-GAAP measure attached). --
Unrestricted cash, cash equivalents, unencumbered residential
mortgage backed securities ("RMBS") and net equity in financed RMBS
totaled approximately $61.7 million at quarter end. -- Assets under
management ("AUM") totaled $9.9 billion at July 1, 2009. -- Debt in
the form of trust preferred securities amended to decrease net
worth covenant contained therein from $175 million to $50 million
and to provide that the measurement date for such covenant will
begin on September 30, 2012. Commenting on the second quarter
results, Jonathan Trutter, Chief Executive Officer, said, "The
achievement of positive financial results in net income and core
earnings for the second consecutive quarter was primarily driven by
the following factors: first, investment advisory fees generated
from the $9.9 billion of assets we manage; second, an overall
increase in the values of assets held in our principal investing
portfolio; third, solid net interest income from our principal
investing portfolio; and, finally, the reduction in overall
expenses from our cost savings initiatives." Trutter added, "We
believe that our current quarter results along with the recently
announced permanent amendment of our trust preferred debt
significantly stabilizes our financial condition and will help pave
the way for our ongoing focus on growing top line revenue." Second
Quarter Financial Overview The results for the quarter ended June
30, 2009 reflect the Company's second consecutive quarter of
positive net income and core earnings. The overall lower interest
rate environment reduced the Company's cost of financing, which was
the most significant driver in the Company's improved net interest
income and core earnings as compared to the three months ended
March 31, 2009. The improvement in net interest income was
partially offset by the expected decline in investment advisory
fees. Total expenses increased as compared to the first quarter of
2009 primarily due to the required consolidation of Deerfield
Pegasus Loan Capital LP ("DPLC"), the Company's investment venture
with Pegasus Capital Advisors L.P. ("Pegasus"), which incurred
expenses of $3.6 million during the second quarter of 2009. These
expenses were paid for by DPLC and are consolidated for GAAP
financial reporting purposes. A net loss of $2.9 million related to
the portion of DPLC the Company does not own is added back at the
bottom of our statement of operations as "Net loss attributable to
noncontrolling interest" in arriving at "Net income attributable to
DFR." Excluding the DPLC expenses, total expenses were relatively
flat with an increase of $0.1 million as compared to the first
quarter of 2009. The $58.7 million of net other income and gain for
the second quarter was primarily a result of the deconsolidation of
Market Square CLO and the improvement in asset values, which
contributed $29.6 million and $29.1 million to net income,
respectively. These amounts are excluded from core earnings. The
net gain on the deconsolidation of Market Square CLO represented
the reversal of the losses in excess of the amount at risk that had
previously been required to be recorded in accordance with GAAP. As
of June 30, 2009, none of the Market Square CLO assets, liabilities
or equity are included in the Company's condensed consolidated
balance sheet; however, all of the financial impacts to the
condensed consolidated statement of operations from the previous
consolidation of Market Square CLO were recognized through June 30,
2009. The net income attributable to DFR for the quarter totaled
$52.9 million, or $7.85 per diluted common share, an improvement of
$41.4 million as compared to the net income attributable to DFR of
$11.5 million, or $1.72 per diluted common share, during the first
quarter of 2009. During the second quarter, DFR also had positive
core earnings of $5.5 million, or $0.82 per share, an increase of
$0.5 million, or 10.0 percent, as compared to the $5.0 million, or
$0.75 per share, of core earnings generated during the first
quarter of 2009. Net interest income totaled $8.4 million for the
quarter ended June 30, 2009, an increase of $1.6 million, or 23.5
percent, as compared to $6.8 million in the first quarter of 2009.
The overall lower interest rate environment during the quarter
resulted in a $1.3 million reduction in interest expense as
compared to the first quarter of 2009. While interest income
attributable to the Company's RMBS portfolio declined by $0.3
million, the corporate debt investments interest income increased
by $0.6 million as compared to the first quarter of 2009. Market
Square CLO contributed net interest income of $1.8 million for the
second quarter, consisting of $3.0 million of interest income, less
$1.2 million of interest expense. The deconsolidation of Market
Square CLO as of June 30, 2009 will result in decreased net
interest income in the financial results of future periods.
Investment advisory fees totaled $4.0 million in the quarter, a
decline of $0.7 million, or 14.9 percent, as compared to $4.7
million in the first quarter of 2009. The decrease in investment
advisory fees was primarily the result of the breach of certain
overcollateralization tests contained in the indentures governing
certain of the collateralized loan obligations ("CLOs") that the
Company manages. Pursuant to the terms of the Company's CLO
management agreements, all or a portion of the Company's
subordinated management fees may be deferred if, among other
things, overcollateralization tests and other structural
protections built into the CLOs are breached and cash flows are
diverted from the payment of management fees and other expenses to
the prepayment of principal of the debt securities issued by the
CLOs. Breaches of overcollateralization tests may occur if, for
example, the issuers of the collateral held by the CLOs default on
or defer payment of principal or the ratings assigned to such
collateral are downgraded below a specified threshold. Subordinated
investment advisory fees declined by $0.9 million during the three
months ended June 30, 2009 as compared to the first quarter of
2009. The Company expects its subordinated investment advisory fees
to continue to be deferred in the near term. However, over time and
with improvement in market conditions, the Company expects the CLOs
to regain compliance with the overcollateralization tests and,
subject to the satisfaction of certain other conditions, the
Company would expect to recoup at least a portion and potentially
substantially all of the deferred subordinated management fees and
to receive future CLO subordinated management fees on a current
basis. The provision for loan losses was $9.1 million for the
quarter as compared to $2.1 million in the first quarter of 2009.
This quarter's provision for loan losses consisted of $8.8 million
related to loans held in DFR Middle Market CLO Ltd. ("DFR MM CLO")
and $0.3 million related to commercial real estate loans. Expenses
totaled $12.0 million for the quarter, an increase of $3.7 million,
or 44.6 percent, as compared to $8.3 million in the first quarter
of 2009. The increase was primarily the result of $3.6 million of
expenses related to DPLC, $3.2 million of which were one-time
organizational and structuring fees. Excluding the $3.6 million of
expenses, which were borne by DPLC and required to be consolidated
into the financial results of the Company, expenses were nearly
flat with a $0.1 million, or 1.2 percent, increase as compared to
the first quarter of 2009. Other income and gain (loss) was a net
gain of $58.7 million in the quarter as compared to a net gain of
$10.5 million in the first quarter of 2009. The improvement in the
current quarter primarily resulted from the deconsolidation of
Market Square CLO, which contributed $29.6 million of gain. This
gain represents the reversal of losses in excess of the amount of
the Company's investment at risk, required to be recorded in prior
periods The Company also had net gains of $24.9 million related to
the Company's loan portfolio. These net gains largely consisted of
unrealized appreciation in the assets held in Market Square CLO.
The Company's future results will not reflect changes in the values
of loans held in Market Square CLO as a result of its
deconsolidation. The Company also experienced net gains in the
remainder of its principal investing portfolio of $4.2 million.
Trust Preferred Debt Amendment As previously announced, on July 31,
2009, the Company entered into three supplemental indentures (the
"Supplemental Indentures") with the holders of the trust preferred
securities issued by each of Deerfield Capital Trust I, Deerfield
Capital Trust II and Deerfield Capital Trust III (collectively the
"Trust Preferred Securities"). The Supplemental Indentures amend
the consolidated net worth covenants (the "Net Worth Covenants")
contained in the indentures governing the Trust Preferred
Securities to (i) permanently decrease the net worth required by
the Net Worth Covenants from $175 million to $50 million and (ii)
provide that the initial measurement date for compliance with the
Net Worth Covenants will be September 30, 2012. These provisions
supersede the temporary waiver of the Net Worth Covenants obtained
from the holders of the Trust Preferred Securities in November
2008. The Supplemental Indentures also contain provisions
prohibiting the Company from incurring additional indebtedness and
declaring additional dividends and distributions on its capital
stock, in each case for the life of the Trust Preferred Securities
and except as specifically permitted under the terms of the
Supplemental Indentures. AUM As of July 1, 2009, the Company's AUM
totaled approximately $9.9 billion held in 28 collateralized debt
obligations ("CDOs"), one other investment vehicle and six
separately managed accounts. Investment Portfolio Total invested
assets decreased by $226.8 million, or 27.0 percent, to $612.9
million as of June 30, 2009 as compared to the end of the first
quarter of 2009. The decrease was primarily attributable to the
deconsolidation of Market Square CLO. Liquidity Unencumbered RMBS
and unrestricted cash and cash equivalents aggregated $45.1 million
at June 30, 2009. In addition, net equity in the financed RMBS
portfolio (including associated interest rate swaps), excluding the
unencumbered RMBS included above, totaled $16.6 million at quarter
end. In total, the Company had unrestricted cash and cash
equivalents, unencumbered RMBS and net equity in its financed RMBS
portfolio of $61.7 million as of June 30, 2009. As of June 30,
2009, the fair value of its Agency RMBS and non-Agency RMBS
portfolios were $308.0 million and $3.1 million, respectively.
About the Company DFR, through its subsidiary, Deerfield Capital
Management LLC, manages client assets, including bank loans and
other corporate debt, RMBS, government securities and asset-backed
securities. In addition, DFR has a principal investing portfolio
comprised of fixed income investments, including bank loans and
other corporate debt and RMBS. For more information, please go to
the Company website, at http://www.deerfieldcapital.com/. * * Notes
and Tables to Follow * * NOTES TO PRESS RELEASE Certain statements
in this press release are forward-looking as defined by the Private
Securities Litigation Reform Act of 1995. These include statements
regarding future results or expectations. Forward-looking
statements can be identified by forward looking language, including
words such as "believes," "anticipates," "expects," "estimates,"
"intends," "may," "plans," "projects," "will" and similar
expressions, or the negative of these words. Such forward-looking
statements are based on facts and conditions as they exist at the
time such statements are made. Forward-looking statements are also
based on predictions as to future facts and conditions, the
accurate prediction of which may be difficult and involve the
assessment of events beyond the control of Deerfield Capital Corp.
and its subsidiaries ("DFR"). Forward-looking statements are
further based on various operating assumptions. Caution must be
exercised in relying on forward-looking statements. Due to known
and unknown risks, actual results may differ materially from
expectations or projections. DFR does not undertake any obligation
to update any forward-looking statement, whether written or oral,
relating to matters discussed in this press release, except as may
be required by applicable securities laws. Various factors could
cause DFR's actual results to differ materially from those
described in any forward-looking statements. These factors include,
but are not limited to: changes in economic and market conditions,
particularly as they relate to the markets for debt securities,
such as RMBS, and CDOs; continued availability of financing; DFR's
ability to maintain adequate liquidity; changes in DFR's
investment, hedging or credit strategies or the performance and
values of its investment portfolios; whether the conditions to
Pegasus Capital Advisors L.P.'s DPLC investment commitments are
satisfied; DFR's ability to comply with the continued listing
standards of the NYSE Amex LLC; DFR's ability to generate earnings
or raise capital to achieve positive stockholders' equity; the
effects of defaults or terminations under, and DFR's ability to
enter into replacement transactions with respect to, repurchase
agreements, interest rate swaps and long-term debt obligations;
reductions in DFR's assets under management and related management
and advisory fee revenue; DFR's ability to make investments in new
investment products and realize growth of fee-based income; changes
to DFR's tax status; DFR's ability to forecast its tax attributes,
which are based upon various facts and assumptions, and its ability
to protect and use its net operating losses to offset taxable
income; DFR's ability to maintain compliance with its existing debt
instruments and other contractual obligations; impact of
restrictions contained in DFR's existing debt instruments; DFR's
ability to maintain its exemption from registration as an
investment company pursuant to the Investment Company Act of 1940;
the cost, uncertainties and effect of any legal and administrative
proceedings, such as the current Securities and Exchange Commission
("SEC") investigation into certain mortgage-backed securities
trading procedures in connection with which the SEC has requested
certain information from DFR regarding certain of its mortgage
securities trades; DFR's ability to enter into, and the effects of,
any potential strategic transactions; and changes in, and the
ability of DFR to remain in compliance with, law, regulations or
government policies affecting DFR's business, including investment
management regulations and accounting standards. These and other
factors that could cause DFR's actual results to differ materially
from those described in the forward-looking statements are set
forth in DFR's annual report on Form 10-K for the year ended
December 31, 2008, DFR's quarterly reports on Form 10-Q and DFR's
other public filings with the SEC and public statements. Readers of
this press release are cautioned to consider these risks and
uncertainties and not to place undue reliance on any
forward-looking statements. DEERFIELD CAPITAL CORP. AND ITS
SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) June
30, March 31, June 30, 2009 2009 2008 ---- ---- ---- (In thousands,
except share and per share amounts ----------------------------
ASSETS Cash and cash equivalents $41,846 $42,354 $44,532 Due from
broker 3,621 23,939 20,716 Restricted cash and cash equivalents
27,201 23,905 68,462 Available-for-sale securities-at fair value -
2,619 7,403 Investments at fair value, including $309,278, $335,252
and 1,434,493 pledged 318,310 339,436 1,445,802 Other investments
4,780 4,764 5,472 Derivative assets 61 21 1,780 Loans held for sale
9,363 210,616 264,559 Loans held for investment 309,021 304,438
383,663 Allowance for loan losses (28,589) (22,171) (7,883) -------
------- ------ Loans held for investment, net of allowance for loan
losses 280,432 282,267 375,780 Investment advisory fee receivables
2,009 2,030 5,142 Interest receivable 3,287 4,360 8,061 Other
receivable 1,264 2,513 985 Prepaid and other assets 8,410 11,678
13,992 Deferred tax asset, net - - 13,422 Fixed assets, net 8,498
8,820 9,793 Intangible assets, net 25,558 26,997 70,642 Goodwill -
- 78,158 --- --- ------ TOTAL ASSETS $734,640 $986,319 $2,434,701
======== ======== ========== LIABILITIES Repurchase agreements,
including $83, $53 and $915 of accrued interest $294,470 $318,641
$1,408,955 Due to broker 1,800 - 5,649 Dividend Payable - - 1,667
Derivative liabilities 953 13,817 6,796 Interest payable 1,661
2,575 5,029 Accrued and other liabilities 4,210 7,190 25,751 Short
term debt - - 483 Long term debt 427,530 714,622 755,541 -------
------- ------- TOTAL LIABILITIES 730,624 1,056,845 2,209,871
------- --------- --------- STOCKHOLDERS' EQUITY (DEFICIT)
Preferred stock, par value $0.001: 100,000,000 shares authorized;
14,999,992 shares issued and zero outstanding - - - Common stock,
par value $0.001: 500,000,000 shares authorized; 6,455,466 and
6,455,466 and 6,675,836 shares issued and 6,454,924 and 6,454,383
and 6,669,342 shares outstanding 6 6 6 Additional paid-in capital
866,534 865,910 866,261 Accumulated other comprehensive loss (49)
(3,928) (2,523) Accumulated deficit (879,648) (932,514) (638,914)
-------- -------- -------- DEERFIELD CAPITAL CORP. STOCKHOLDERS'
DEFICIT (13,157) (70,526) 224,830 Noncontrolling interest in
consolidated entity 17,173 - - ------ --- --- TOTAL STOCKHOLDERS'
EQUITY (DEFICIT) 4,016 (70,526) 224,830 ----- ------- ------- TOTAL
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) $734,640 $986,319
$2,434,701 ======== ======== ========== DEERFIELD CAPITAL CORP. AND
ITS SUBSIDIARIES CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)
Three months ended Six months ended June 30, March 31, June 30,
June 30, 2009 2009 2008 2009 2008 ---- ---- ---- ---- ---- (In
thousands, except share and per share amounts)
---------------------------------------------------- Revenues
Interest income $14,098 $13,782 $21,824 $27,880 $83,174 Interest
expense 5,666 6,999 12,421 12,665 60,021 ----- ----- ------ ------
------ Net interest income 8,432 6,783 9,403 15,215 23,153
Provision for loan losses 9,119 2,107 2,302 11,226 4,502 -----
----- ----- ------ ----- Net interest (expense) income after
provision for loan losses (687) 4,676 7,101 3,989 18,651 Investment
advisory fees 4,009 4,737 12,359 8,746 24,478 ----- ----- ------
----- ------ Total net revenues 3,322 9,413 19,460 12,735 43,129
----- ----- ------ ------ ------ Expenses Compensation and benefits
3,029 3,354 7,635 6,383 16,736 Professional services 728 790 2,343
1,518 3,730 Insurance expense 771 764 733 1,535 1,467 Other general
and administrative expenses 4,814 946 1,850 5,760 3,280
Depreciation and amortization 1,629 1,635 2,580 3,264 5,267
Occupancy 569 639 609 1,208 1,230 Management and incentive fee
expense to related party 295 - - 295 - Cost savings initiatives 28
197 70 225 327 Impairment of intangible assets and goodwill 126 -
1,128 126 29,034 --- --- ----- --- ------ Total expenses 11,989
8,325 16,948 20,314 61,071 ------ ----- ------ ------ ------ Other
Income and Gain (Loss) Net (loss) gain on available-for-sale
securities - (31) (3,856) (31) (3,856) Net gain (loss) on
investments at fair value 1,173 5,138 (1,747) 6,311 (202,466) Net
gain (loss) on loans 24,876 5,815 5,505 30,691 (21,037) Net gain
(loss) on derivatives 2,981 (404) 6,070 2,577 (217,145) Dividend
income and other net gain (loss) 152 (49) 76 103 194 Net gain on
the deconsolidation of Market Square CLO 29,551 - - 29,551 - ------
--- --- ------ --- Net other income and gain (loss) 58,733 10,469
6,048 69,202 (444,310) ------ ------ ----- ------ -------- Income
(loss) before income tax expense (benefit) 50,066 11,557 8,560
61,623 (462,252) Income tax expense (benefit) 160 18 2,868 178
(4,334) --- --- ----- --- ------ Net income (loss) 49,906 11,539
5,692 61,445 (457,918) Less: Cumulative convertible preferred stock
dividends and accretion - - - - 2,393 --- --- --- --- ----- Net
income (loss) attributable to common stockholders 49,906 11,539
5,692 61,445 (460,311) Net loss attributable to noncontrolling
interest 2,960 - - 2,960 - ----- --- --- ----- --- Net income
(loss) attributable to Deerfield Capital Corp. $52,866 $11,539
$5,692 $64,405 $(460,311) ======= ======= ====== ======= =========
Net income (loss) attributable to Deerfield Capital Corp. per share
- basic $7.85 $1.72 $0.83 $9.59 $(74.08) Net income (loss)
attributable to Deerfield Capital Corp. per share - diluted $7.85
$1.72 $0.83 $9.59 $(74.08) WEIGHTED-AVERAGE NUMBER OF SHARES
OUTSTANDING - BASIC 6,730,655 6,702,329 6,881,715 6,716,570
6,213,318 WEIGHTED-AVERAGE NUMBER OF SHARES OUTSTANDING - DILUTED
6,730,655 6,702,329 6,881,715 6,716,570 6,213,318 DEERFIELD CAPITAL
CORP. AND ITS SUBSIDIARIES RECONCILIATION OF NON-GAAP MEASURE The
Company believes that core earnings, a non-GAAP financial measure,
is a useful metric for evaluating and analyzing its performance.
The calculation of core earnings, which the Company uses to compare
financial results from period to period, eliminates the impact of
certain non-cash and special charges and income tax. Core earnings
provided herein may not be comparable to similar measures presented
by other companies as it is a non-GAAP financial measure and may
therefore be defined differently by other companies. Core earnings
includes the earnings from the Company's consolidated variable
interest entity ("VIE"), DFR MM CLO, and from Market Square CLO,
which was a consolidated VIE until the Company sold all of its
preference shares in Market Square CLO and deconsolidated that
entity as of June 30, 2009. Core earnings is not indicative of cash
flows received from these VIEs. Core Earnings The table below
provides reconciliation between net income (loss) and core
earnings: Three months ended Six months ended June 30, March 31,
June 30, June 30, 2009 2009 2008 2009 2008 ---- ---- ---- ---- ----
(In thousands, except share and per share amounts)
---------------------------------------------------- Net income
(loss) $49,906 $11,539 $5,692 $61,445 $(457,918) Add back:
Provision for loan losses 9,119 2,107 2,302 11,226 4,502 Cost
saving initiatives 28 197 70 225 327 Depreciation and amortization
1,629 1,635 2,580 3,264 5,267 Impairment of intangible assets and
goodwill 126 - 1,128 126 29,034 Net other income and (gain) loss
(58,733) (10,469) (6,048) (69,202) 444,310 Income tax expense
(benefit) 160 18 2,868 178 (4,334) Noncontrolling interest core
earnings (1) 3,297 - - 3,297 - ----- --- --- ----- --- Core
earnings $5,532 $5,027 $8,592 $10,559 $21,188 ====== ====== ======
======= ======= Core earnings per share - diluted $0.82 $0.75 $1.25
$1.57 $3.41 Weighted-average number of shares outstanding - diluted
6,730,655 6,702,329 6,881,715 6,716,570 6,213,318 (1)
Noncontrolling interest core earnings represents the portion of the
net interest income and expenses of DPLC that are attributable to
third party investors in DPLC, calculated using each investor's
ownership percentage in DPLC during the measurement period.
DEERFIELD CAPITAL CORP. AND ITS SUBSIDIARIES INVESTMENT ADVISORY
FEES AND INTEREST INCOME AND EXPENSE The following table summarizes
the Company's investment advisory fees and interest income and
expense: Three months ended Six months June March June ended 30,
31, 30, June 30, 2009 2009 2008 2009 2008 ---- ---- ---- ---- ----
(In thousands) -------------- CDO management fees: Senior fees
$2,892 $2,938 $3,756 $5,830 $8,073 Subordinated fees 525 1,403
3,646 1,928 7,188 Performance fees 245 152 2,702 397 2,774 --- ---
----- --- ----- Total CDO management fees 3,662 4,493 10,104 8,155
18,035 Separately managed accounts and other 223 244 263 467 509
Other investment vehicle 124 - - 124 - Fixed income arbitrage
investment funds - - 1,992 - 5,934 --- --- ----- --- ----- Total
investment advisory fees $4,009 $4,737 $12,359 $8,746 $24,478
====== ====== ======= ====== ======= Interest Income: RMBS, U.S.
Treasury bills and other securities $4,258 $4,561 $6,755 $8,819
$49,880 Assets held in Market Square CLO 3,003 3,070 4,281 6,073
9,508 Assets held in DFR MM CLO 6,226 5,820 7,003 12,046 15,243
Assets held in DPLC 35 - - 35 - Other corporate debt 576 331 3,785
907 8,543 --- --- ----- --- ----- Total interest income 14,098
13,782 21,824 27,880 83,174 ====== ====== ====== ====== ======
Interest Expense: Recourse: Repurchase agreements and other short
term debt $605 $692 $3,310 $1,297 $40,018 Series A and Series B
notes 1,311 1,340 1,439 2,651 3,258 Trust preferred securities
1,382 1,623 1,985 3,005 4,245 ----- ----- ----- ----- ----- Total
recourse interest expense 3,298 3,655 6,734 6,953 47,521 -----
----- ----- ----- ------ Non-Recourse Market Square CLO 1,205 1,705
2,563 2,910 5,919 DFR MM CLO 1,131 1,545 2,264 2,676 5,220 Wachovia
Facility 32 94 860 126 1,361 --- --- --- --- ----- Total
non-recourse interest expense 2,368 3,344 5,687 5,712 12,500 -----
----- ----- ----- ------ Total interest expense $5,666 $6,999
$12,421 $12,665 $60,021 ====== ====== ======= ======= =======
DEERFIELD CAPITAL CORP. AND ITS SUBSIDIARIES AUM AND INVESTMENT
PORTFOLIO The following table summarizes AUM for each product
category: July 1, 2009 April 1, 2009 July 1, 2008 ------------
------------- ------------ Number of Number of Number of Accounts
AUM Accounts AUM Accounts AUM -------- --- -------- --- --------
--- (In (In (In thousands) thousands) thousands) ----------
---------- ---------- CDOs (1) : CLOs 12 $4,098,226 12 $4,184,002
15 $5,151,278 Asset-backed securities 12 4,561,067 12 4,906,125 13
6,336,532 Corporate bonds 4 855,050 4 910,924 2 620,883 --- -------
--- ------- --- ------- Total CDOs 28 9,514,343 28 10,001,051 30
12,108,693 Other investment vehicle (2) 1 22,106 0 - 0 - Fixed
income arbitrage 0 - 0 - 1 436,156 Separately managed accounts (3)
6 322,928 6 320,488 6 431,480 ------- ------- ------- Total AUM (4)
$9,859,377 $10,321,539 $12,976,329 ========== ===========
=========== (1) CDO AUM numbers generally reflect the aggregate
principal or notional balance of the collateral and, in some cases,
the cash balance held by the CDOs and are as of the date of the
last trustee report received for each CDO prior to July 1, 2009,
April 1, 2009, and July 1, 2008, respectively. The AUM for our
Euro-denominated CDOs has been converted into U.S. dollars using
the spot rate of exchange on June 30, 2009, March 31, 2009 and June
30, 2008, respectively. (2) Other investment vehicle AUM represents
the AUM of DPLC. (3) AUM for certain of the separately managed
accounts is a multiple of the capital actually invested in such
account. Management fees for these accounts are paid on this higher
AUM amount. (4) Included in Total AUM for July 1, 2009 are $289.8
million and $22.1 million related to DFR MM CLO and DPLC,
respectively, which amounts are also included in the total AUM
reported for the Principal Investing portfolio as of June 30, 2009.
Included in Total AUM for April 1, 2009 are $296.5 million and
$293.8 million related to Market Square CLO and DFR MM CLO,
respectively, which amounts are also included in the total AUM
reporting for the Principal Investing portfolio as of March 31,
2009. Included in Total AUM for July 1, 2008 are $295.3 million and
$300.8 million related to Market Square CLO and DFR MM CLO,
respectively, which amounts are also included in the total AUM
reporting for the Principal Investing portfolio as of June 30,
2008. DCM manages DFR MM CLO but is not contractually entitled to
receive any management fees so long as 100 percent of the equity is
held by DC LLC or an affiliate thereof. DCM manages DPLC and
receives management fees for its services. All other amounts
included in the Principal Investing portfolio are excluded from
Total AUM. The following table summarizes the principal investing
portfolio: June 30, 2009 March 31, 2009 June 30, 2008 -------------
-------------- ------------- % of % of % of Total Total Total
Principal Carrying Invest- Carrying Invest- Carrying Invest-
Investments Value ments Value ments Value ments ------------ -----
------ ----- ------ ----- ------ (In (In (In thousands) thousands)
thousands) ---------- ---------- ---------- RMBS (1) $311,154 48.5%
$338,729 39.3% $444,185 21.1% U.S. Treasury Bills - 0.0% - 0.0%
999,954 47.5% Corporate leveraged loans: Loans held in DFR MM CLO
(2) 299,751 46.7% 292,108 33.9% 259,577 12.3% Loans held in
Wachovia Facility 1,251 0.2% 4,831 0.6% 89,627 4.2% Other corporate
leveraged loans 8,112 1.3% 8,270 1.0% 24,879 1.2% Loans held in
DPLC 6,841 1.1% - 0.0% - 0.0% Assets held in Market Square CLO (3)
- 0.0% 200,841 23.3% 263,037 12.5% Commercial real estate loans and
securities 9,270 1.4% 12,330 1.4% 17,212 0.8% Equity securities
4,780 0.7% 4,764 0.5% 5,472 0.3% Other investments 315 0.1% - 0.0%
1,293 0.1% --- --- --- --- ----- --- Total Investments 641,474
100.0% 861,873 100.0% 2,105,236 100.0% ===== ===== ===== Allowance
for loan losses (28,589) (22,171) (7,883) ------- ------- ------
Net Investments $612,885 $839,702 $2,097,353 ======== ========
========== (1) RMBS consist of agency RMBS with estimated fair
values of $308.0 million, $333.9 million and $415.3 million as of
June 30, 2009, March 31, 2009 and June 30, 2008, respectively, and
non-agency RMBS with estimated fair values of $3.1 million, $4.8
million and $28.9 million as of June 30, 2009, March 31, 2009 and
June 30, 2008, respectively. (2) Assets held in DFR MM CLO are the
result of the July 17, 2007 securitization of corporate loans held
in a non-recourse credit facility. The Company purchased 100
percent of the equity interests for $50.0 million and all of the
BBB/Baa2 rated notes for $19.0 million. (3) Assets held in Market
Square CLO include syndicated bank loans of $197.5 million and
$257.9 million, high yield corporate bonds and ABS of $2.6 million
and $5.1 million and other investments of $0.7 million and zero as
of March 31, 2009 and June 30, 2008, respectively. DATASOURCE:
Deerfield Capital Corp. CONTACT: Frank Straub, Chief Financial
Officer of Deerfield Capital Corp., +1-773-380-6636; or Leslie
Loyet of Financial Relations Board, +1-312-640-6672, for Deerfield
Capital Corp. Web Site: http://www.deerfieldcapital.com/
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