NEW YORK, NEW YORK -
Crystal River's management will host a dial-in teleconference to
review its first quarter 2008 financial results on May 13, 2008, at
9:00 a.m. (EDT). The teleconference can be accessed by dialing
888-262-8797 or 913-312-1429 (International). A replay of the
recorded teleconference will be available through May 27, 2008. The
replay can be accessed by dialing 888-203-1112 or 719-457-0820
(International) and entering passcode 9434871. A live audio webcast
of the call will be accessible on the Company's website,
www.crystalriverreit.com, via a link from the Investor Relations
section. A replay of the audio webcast will be archived in the
Investor Relations section of the Company's website.
Crystal River Capital, Inc. ("Crystal River" or the "Company")
(NYSE: CRZ) today announced its results for the quarter ended March
31, 2008.
I. PORTFOLIO HIGHLIGHTS
Crystal River significantly reduced risk in its balance sheet
through the sale of its Agency mortgage-backed securities ("MBS")
portfolio and its real estate finance fund investment. These
transactions, which settled by April 30, 2008, enabled the Company
to:
- Reduce its debt-to-equity ratio to 5:1
- Reduce its short-term repurchase debt from $1.3 billion to
$28.1 million
- Pay down its funding facility to less than $50 million
drawn
"As we anticipate continued difficulties in the credit markets
for the remainder of 2008, we proactively deleveraged the balance
sheet and reduced liquidity risk to the Company by selling our
Agency MBS portfolio," said Clifford Lai, Crystal River's President
and Chief Executive Officer. "Following this repositioning, 95.5%
of the Company's total debt was term funded."
II. FIRST QUARTER FINANCIAL SUMMARY
Net investment income (defined below) for the quarter ended
March 31, 2008 increased to $24.6 million, or $0.99 per share,
compared to net investment income of $18.5 million, or $0.74 per
share, for the first quarter of 2007 and net investment income of
$19.9 million, or $0.80 per share, for the fourth quarter of 2007.
The increase over the prior periods was primarily attributable to
the decrease in interest expense resulting from lower financing
costs on the Company's floating-rate debt.
Operating earnings (defined below) for the quarter ended March
31, 2008 totaled to $20.1 million, or $0.81 per share, compared to
$14.8 million, or $0.59 per share, for the first quarter of 2007
and $17.9 million, or $0.72 per share, for the fourth quarter of
2007.
"Our first quarter operating results benefited from a steepening
yield curve and a decline in financing costs on our Agency MBS
portfolio," Mr. Lai added. "We have significantly reduced the risk
in our balance sheet to protect our capital during these difficult
times. Although the first quarter Agency MBS portfolio sale is
expected to reduce operating earnings, we believe we are better
positioned for the future."
The net loss for the quarter ended March 31, 2008, totaled
$137.7 million, or $5.56 per share, compared to net income of $7.5
million, or $0.30 per share, for the first quarter of 2007 and a
net loss of $250.4 million, or $10.10 per share, for the fourth
quarter of 2007. The primary contributors to the first quarter 2008
net loss were impairment charges and mark-to-market adjustments
totaling $100.0 million and $43.4 million of realized and
unrealized losses on derivatives. Finally, the Company also
recorded a $9.1 million loan loss allowance on its real estate loan
holdings.
The following table details the Company's impairment charges and
mark-to-market adjustments on its available for sale securities by
type and by sector for the quarter ended March 31, 2008:
Impairment charges and mark-to-market adjustments of assets and
liabilities:
Securitized Assets and Liabilities:
----------------------------------------------------------------------------
Agency Prime Subprime
($ in millions) MBS CMBS(4) RMBS(5) RMBS Liabilities Total
----------------------------------------------------------------------------
Cash flows(1) $ - $ (6.9) $ (27.4) $ (13.8) $ - $ (48.1)
Yield-spread
widening(2) - (87.5) (6.6) (3.0) - (97.1)
MTM(3) assets - (0.4) (0.2) (0.9) - (1.5)
MTM liabilities - - - - 113.9 113.9
----------------------------------------------------------------------------
Total $ - $ (94.8) $ (34.2) $ (17.7) $ 113.9 $ (32.8)
----------------------------------------------------------------------------
(1) Accounting rule EITF 99-20 refers to changes in cash flow assumptions
on underlying assets
(2) Accounting rule EITF 99-20 refers to excessive yield spread widening on
underlying assets
(3) Mark-to-market adjustments under SFAS 159 ("MTM")
(4) Commercial mortgage-backed securities ("CMBS")
(5) Residential mortgage-backed securities ("RMBS")
Non-Securitized Assets:
----------------------------------------------------------------------------
Agency Prime Subprime Preferred
($ in millions) MBS CMBS RMBS RMBS Stock Total
----------------------------------------------------------------------------
Cash flows $ - $ (0.8) $ (16.6) $ (5.7) $ - $ (23.1)
Yield-spread
widening (30.9) (7.6) (4.6) (1.0) (44.1)
----------------------------------------------------------------------------
Total $ - $ (31.7) $ (24.2) $ (10.3) $ (1.0) $ (67.2)
----------------------------------------------------------------------------
Crystal River closed out $55 million of its credit default swap
("CDS") exposure, realizing another $10.4 million loss as a result
of widening yield spreads during the first quarter of 2008 in
addition to the $19.8 million that was accrued in 2007. Following
these transactions, the Company had a total of $20 million of
single-name CDS exposure remaining, against which $15.2 million in
unrealized losses was accrued as of March 31, 2008.
Dividend Information
Crystal River previously announced that its Board of Directors
declared a cash distribution for the quarter ended March 31, 2008
of $0.68 per share. The common stock cash distribution was paid on
April 29, 2008 to stockholders of record as of the close of
business on March 31, 2008.
Pursuant to REIT requirements, the Company historically has paid
regular quarterly cash distributions of all or substantially all of
its REIT taxable income to holders of Crystal River's common stock.
In the first quarter of 2008, Crystal River sold its $1.2 billion
Agency MBS portfolio and real estate finance fund investment,
following which the Company expects its future distributions to be
less than previous distributions, as these assets contributed
approximately half of Crystal River's estimated REIT taxable income
of $0.63 per share for the quarter ended March 31, 2008.
Crystal River's dividend level will continue to be determined by
the Board of Directors based on a number of factors, including, but
not limited to, operating results, economic conditions, capital
requirements, taxable income, available tax losses, liquidity,
retention of capital and other operating trends.
About Crystal River
Crystal River Capital, Inc. (NYSE: CRZ) is a specialty finance
REIT. The Company invests in commercial real estate, real estate
loans, real estate-related securities, such as commercial and
residential mortgage-backed securities, and other alternative asset
classes. Crystal River focuses on opportunities across the real
estate spectrum. For more information, visit
www.crystalriverreit.com.
III. CONSOLIDATED FINANCIAL STATEMENTS
Condensed Consolidated Balance Sheets
----------------------------------------------------------------------------
March 31, December 31, March 31,
($ in thousands, except share 2008 2007 2007
and per share data) (unaudited) (unaudited)
----------------------------------------------------------------------------
ASSETS
Available for sale securities,
at fair value $ 355,528 $ 1,815,246 $ 2,823,027
Real estate loans 50,768 170,780 252,680
Real estate loans held for sale 107,345 - -
Commercial real estate, net 233,137 234,763 210,961
Other investments 1,550 37,761 58,115
Intangible assets 79,765 81,174 83,381
Cash and cash equivalents 8,664 27,521 42,586
Restricted cash 27,455 68,706 76,419
Receivables 32,490 31,637 40,166
Due from broker 393,566 - -
Prepaid expenses and other
assets 2,177 540 2,641
Deferred financing costs, net 2,152 10,750 11,223
Derivative assets 10 560 14,195
-------------------------------------------
Total Assets $ 1,294,607 $ 2,479,438 $ 3,615,394
-------------------------------------------
-------------------------------------------
LIABILITIES AND STOCKHOLDERS'
EQUITY
Accounts payable, accrued
expenses, and cash collateral
payable $ 728 $ 1,817 $ 3,115
Due to Manager 693 678 4,131
Due to broker - - 80,454
Due to affiliate 439 - -
Dividends payable 16,835 16,828 17,032
Intangible liabilities 76,375 77,745 73,403
Repurchase agreements 408,677 1,276,121 1,989,928
Repurchase agreement, related
party - - 124,806
Collateralized debt obligations(1) 182,769 486,608 516,895
Junior subordinated notes held
by trust that issued
trust preferred securities 51,550 51,550 51,550
Mortgage payable 219,380 219,380 198,500
Senior mortgage-backed notes 99,143 99,815 -
Secured revolving credit
facility, related party 48,220 67,319 -
Interest payable 3,610 9,256 17,583
Derivative liabilities 53,545 61,729 17,137
-------------------------------------------
Total Liabilities 1,161,964 2,368,846 3,094,534
-------------------------------------------
Commitments and contingencies - - -
Stockholders' Equity
Preferred stock, par value
$0.001 per share; 100,000,000
shares authorized, no shares
issued and outstanding - - -
Common stock, $0.001 par value,
500,000,000 shares authorized,
24,704,945, 24,704,945 and
25,021,800 shares issued and
outstanding, respectively 25 25 25
Additional paid-in capital 563,064 562,930 566,676
Accumulated other comprehensive
loss (20,135) (15,481) (13,145)
Dividends declared in excess of
results of operations (410,311) (436,882) (32,696)
-------------------------------------------
Total Stockholders' Equity 132,643 110,592 520,860
-------------------------------------------
Total Liabilities and
Stockholders' Equity $ 1,294,607 $ 2,479,438 $ 3,615,394
-------------------------------------------
-------------------------------------------
(1) Fair value at March 31, 2008 and cost at December 31, 2007 and
March 31, 2007
Condensed Consolidated Statements of Operations (Unaudited)
----------------------------------------------------------------------------
Three months ended
($ in thousands, except
share and per share data) March 31, 2008 Dec. 31, 2007 March 31, 2007
----------------------------------------------------------------------------
Revenues
Interest income -
available for sale
securities $ 39,937 $ 40,158 $ 50,204
Interest income - real
estate loans 2,612 3,839 4,325
Other interest and
dividend income 669 1,513 2,700
--------------------------------------------------
Total interest and
dividend income 43,218 45,510 57,229
Rental income, net 5,662 5,554 548
--------------------------------------------------
Total revenues 48,880 51,064 57,777
--------------------------------------------------
Expenses
Interest expense 24,268 31,579 40,119
Management fees, related
party 667 781 2,353
Professional fees 668 1,061 782
Depreciation and
amortization 3,022 3,023 311
Incentive fees, related
party - - 124
Insurance expense 330 264 82
Directors' fees 153 182 162
Public company expense 111 65 71
Commercial real estate
expenses 417 334 10
Provision for loan loss
on real estate loans 9,063 4,500 -
Other expenses 129 122 88
--------------------------------------------------
Total expenses 38,828 41,911 44,102
--------------------------------------------------
Other revenues
(expenses)
Realized net gain (loss)
on sale of securities
available for sale, real
estate loans, and other
investments (3,785) (376) 1,620
Realized and unrealized
loss on derivatives (43,382) (45,100) (8,609)
Impairments on available
for sale securities (67,154) (213,945) (635)
Net change in assets and
liabilities under fair
value option (32,848) - -
Foreign currency
exchange gain - - 502
Income (loss) from
equity investments (40) 431 849
Other (529) (577) 142
--------------------------------------------------
Total other expenses (147,738) (259,567) (6,131)
--------------------------------------------------
Net income (loss) $ (137,686) $ (250,414) $ 7,544
--------------------------------------------------
--------------------------------------------------
Net income (loss) per
share - basic and
diluted $ (5.56) $ (10.10) $ 0.30
--------------------------------------------------
--------------------------------------------------
Weighted average number
of shares outstanding:
Basic and diluted 24,750,048 24,783,624 25,043,565
--------------------------------------------------
--------------------------------------------------
Dividends declared per
share of common stock $ 0.68 $ 0.68 $ 0.68
--------------------------------------------------
--------------------------------------------------
Net Investment Income (Unaudited)
----------------------------------------------------------------------------
Three months ended
($ in thousands,
except share and per
share data) March 31, 2008 Dec. 31, 2007 March 31, 2007
----------------------------------------------------------------------------
Total interest and
dividend income $ 43,218 $ 45,510 $ 57,229
Rental income, net 5,662 5,554 548
(Loss) income from
equity investments (40) 431 849
Interest expense (24,268) (31,579) (40,119)
--------------------------------------------------
Net investment income $ 24,572 $ 19,916 $ 18,507
--------------------------------------------------
--------------------------------------------------
Net investment income
per share $ 0.99 $ 0.80 $ 0.74
--------------------------------------------------
--------------------------------------------------
Weighted average number
of shares outstanding:
Basic and diluted 24,750,048 24,783,624 25,043,565
--------------------------------------------------
--------------------------------------------------
Reconciliation of Net Income (Loss) to Operating Earnings (Unaudited)
----------------------------------------------------------------------------
Three months ended
($ in thousands,
except share and per share
data) March 31, 2008 Dec. 31, 2007 March 31, 2007
----------------------------------------------------------------------------
Net income (loss) $ (137,686) $ (250,414) $ 7,544
Realized net (gain) loss on
sale of securities
available for sale, real
estate loans, and other
investments 3,785 376 (1,620)
Realized and unrealized
loss on derivatives 43,382 45,100 8,609
Impairments on available
for sale securities 67,154 213,945 635
Net change in assets and
liabilities under fair
value option 32,848 - -
Provision for loan loss on
real estate loans 9,063 4,500 -
Foreign currency exchange
gain - - (502)
Depreciation and
amortization 3,022 3,023 311
Cash settlements on
economic hedges that did
not qualify for hedge
accounting treatment (2,044) 801 (8)
Other 529 577 (142)
----------------------------------------------
Operating earnings $ 20,053 $ 17,908 $ 14,827
----------------------------------------------
----------------------------------------------
Operating earnings per
share $ 0.81 $ 0.72 $ 0.59
----------------------------------------------
----------------------------------------------
Weighted average number of
shares outstanding:
Basic and diluted 24,750,048 24,783,624 25,043,565
----------------------------------------------
----------------------------------------------
Comprehensive Loss (Unaudited)
----------------------------------------------------------------------------
Three months ended
($ in thousands) March 31, 2008 December 31, 2007 March 31, 2007
----------------------------------------------------------------------------
Net income (loss) $ (137,686) $ (250,414) $ 7,544
Changes in OCI -
securities available for
sale(1) (7,983) 96,333 (21,113)
Unrealized loss on
effective cash flow
hedges (4,128) (18,299) (2,116)
Realized and unrealized
(gain) loss on
cash flow hedges 8,982 (3,211) (2,738)
Amortization of net
(gain) loss on cash flow
hedges into interest
expense 145 (511) (390)
----------------------------------------------------------------------------
Comprehensive loss $ (140,670) $ (176,102) $ (18,813)
----------------------------------------------------------------------------
(1) Represents reclassification from OCI ("Other Comprehensive Income") to
impairments on available for sale securities
Reconciliation of Net Loss to Estimated REIT Taxable Income (Unaudited)
----------------------------------------------------------------------------
(in thousands, Three months ended
except share and per share data) March 31, 2008
----------------------------------------------------------------------------
GAAP net loss $ (137,686)
-------------------
Adjustments to GAAP net loss:
Net loss of taxable REIT subsidiary 495
Share-based compensation (182)
Net tax adjustments related to interest income (2,621)
Book derivative loss in excess of tax loss 12,875
Capital-loss limitation 34,033
Impairment losses not deductible for tax purposes 67,154
Net change in assets and liabilities under fair value
option 32,848
Loan loss allowance not deductible for tax purposes 9,063
GAAP-to-tax difference on rent escalation and lease
amortization (381)
Other (22)
-------------------
Net adjustments from GAAP net loss to estimated REIT
taxable income 153,262
-------------------
Estimated REIT taxable income 15,576
-------------------
Weighted average number of shares outstanding:
Basic and diluted 24,750,048
-------------------
-------------------
Estimated REIT taxable income per share of common stock $ 0.63
-------------------
-------------------
IV. SUPPLEMENTAL INFORMATION
Total Investment Portfolio at March 31, 2008
The following table summarizes the Company's investment
portfolio at March 31, 2008, December 31, 2007, and March 31,
2007:
----------------------------------------------------------------------------
March 31, 2008 December 31, 2007 March 31, 2007
Carrying Carrying Carrying
($ in millions) Value % Total Value % Total Value % Total
----------------------------------------------------------------------------
Available for
sale securities
Agency MBS $ - - $ 1,246.7 55.2% $ 2,010.8 60.1%
CMBS 271.1 36.2% 399.4 17.7% 493.3 14.8%
Prime RMBS 56.3 7.5% 115.7 5.1% 165.8 5.0%
Subprime RMBS 28.0 3.7% 52.7 2.3% 104.9 3.1%
ABS(1) - - - - 44.2 1.3%
Preferred stock 0.1 0.0% 0.7 0.1% 4.0 0.1%
Direct real
estate loans
Construction
loans 16.4 2.2% 20.9 0.9% 20.4 0.6%
Mezzanine loans 31.9 4.3% 31.9 1.4% 31.9 1.0%
Whole loans(2) 109.8 14.7% 118.0 5.2% 200.4 6.0%
Real estate
finance fund - - 36.2 1.6% - -
Commercial real
estate-owned 233.1 31.2% 234.8 10.4% 211.0 6.3%
Other 1.6 0.2% 1.6 0.1% 58.1 1.7%
----------------------------------------------------------------------------
Total $ 748.3 100.0% $ 2,258.6 100.0% $ 3,344.8 100.0%
----------------------------------------------------------------------------
(1) Asset-backed securities ("ABS")
(2) Includes 13 loans in the amount of $107.3 million as held for sale
First Quarter 2008 Securities Roll-Forward Table
The table below details the impact of purchases and sales,
principal paydowns, premium and discount amortization, and
adjustments to market value on our available for sale securities
during the first quarter of 2008:
----------------------------------------------------------------------------
($ in Agency Prime Subprime Preferred Total
millions) MBS CMBS RMBS RMBS Stock Portfolio
----------------------------------------------------------------------------
Carrying
Value
December
31, 2007 $ 1,246.7 $ 399.4 $ 115.7 $ 52.7 $ 0.7 $ 1,815.2
Sales (1,178.0) (4.1) - - - (1,182.1)
Principal
paydowns (60.4) (0.6) (2.8) (0.1) - (63.9)
Amortization (0.4) 3.1 1.9 3.6 - 8.2
Market value
adjustments:
Non-
securitized
assets - (31.7) (24.2) (10.3) (1.0) (67.2)
OCI (7.9) (0.2) (0.1) (0.2) 0.4 (8.0)
Securitized
assets - (94.8) (34.2) (17.7) - (146.7)
----------------------------------------------------------------------------
Carrying Value
March 31,
2008 $ - $ 271.1 $ 56.3 $ 28.0 $ 0.1 $ 355.5
----------------------------------------------------------------------------
Commercial Real Estate ("CRE") Investment Portfolio
At March 31, 2008, Crystal River's CRE investment portfolio
totaled $236.5 million. The CRE portfolio consisted of three
high-quality office buildings 100% leased on a triple-net basis to
JPMorgan Chase. The buildings are financed with long-term
fixed-rate mortgage loans.
CRE investment portfolio at March 31, 2008:
----------------------------------------------------------------------------
Year of Book Net Book
Lease Total Area Value(1) Debt Equity
Location Tenant Expiry (000s Sq. Ft.) (Millions) (Millions) (Millions)
----------------------------------------------------------------------------
Houston, JPMorgan
Texas Chase 2021 428.6 $ 61.7 $ 53.4 $ 8.3
Arlington, JPMorgan
Texas Chase 2027 171.5 21.8 20.9 0.9
Phoenix, JPMorgan
Arizona Chase 2021 724.0 153.0 145.1 7.9
----------------------------------------------------------------------------
Total CRE 1,324.1 $ 236.5 $ 219.4 $ 17.1
----------------------------------------------------------------------------
(1) Book Value includes intangible assets and intangible liabilities, but
excludes rent-enhancement receivables
Real Estate Loan Investment Portfolio
At March 31, 2008, Crystal River's real estate loan portfolio,
which consists of mezzanine loans, B Notes, construction loans, and
whole loans, totaled $158.1 million and had a weighted average
interest rate of 7.3% . Crystal River also recorded a $9.1 million
loan loss allowance on its real estate loan holdings during the
quarter ended March 31, 2008. Included in this charge is a $6.6
million mark-to-market adjustment resulting from Crystal River's
re-classification of $107.3 million of its real estate loan
portfolio as held for sale.
Real estate loan portfolio at March 31, 2008:
----------------------------------------------------------------------------
Weighted Average
--------------------------------
Carrying
($ in millions) # of Loans Value Interest Rate Years to Maturity
----------------------------------------------------------------------------
Whole loans(1) 14 $ 109.8 5.7% 7.2
Construction loans 2 16.4 12.0% 0.2
Mezzanine loans 3 31.9 9.4% 6.8
----------------------------------------------------------------------------
Total Real Estate Loans 19 $ 158.1 7.2% 6.1
----------------------------------------------------------------------------
(1) Includes 13 loans in the amount of $107.3 million designated as held
for sale
CMBS Investment Portfolio
At March 31, 2008, Crystal River's CMBS portfolio totaled $271.1
million and had an average credit rating of B+. The weighted
average debt service coverage ratio ("DSCR"), which measures the
amount of cash flow available to meet annual interest and principal
payments on debt, was 1.53 and the weighted average loan-to-value
ratio ("LTV") ratio was 68.7% . During the quarter, the Company
sold $4.1 million of CMBS.
CMBS portfolio at March 31, 2008:
----------------------------------------------------------------------------
Weighted Average
-----------------------------
($ in millions) Amortized Cost Carrying Value Book Yield(1) Term (Yrs)
----------------------------------------------------------------------------
BBB $ 124.4 $ 124.4 18.0% 8.5
BB 66.3 66.3 21.5% 8.7
B 39.3 39.3 25.7% 9.5
Below B 41.1 41.1 29.2% 10.3
----------------------------------------------------------------------------
Total CMBS $ 271.1 $ 271.1 21.7% 8.9
----------------------------------------------------------------------------
(1) Book yield is the calculated internal rate of return based on amortized
cost and expected loss-adjusted cash flows
Agency MBS Investment Portfolio
During the first quarter of 2008, Crystal River sold
approximately $1,178.0 million of Agency MBS for cash proceeds
totaling approximately $1,176.1 million, which after repayment of
debt and return of margin cash provided net cash of approximately
$38.3 million and incurred a realized loss of approximately $1.9
million. Some of these trades settled subsequent to the end of the
first quarter of 2008.
The table below provides information related to the sale of Crystal River's
Agency MBS investment portfolio:(1)
----------------------------------------------------------------------------
Amortized Realized | Repurchase
Cost Net | Debt
at Date Cash Gain | Cash Financing Net
($ in millions) of Sale Proceeds (Loss) | Proceeds Repaid Cash
-----------------------------------------------|----------------------------
3/1 hybrid |
adjustable rate $ 225.2 $ 225.4 $ 0.2 | $ 225.4 $ 215.3 $ 10.1
5/1 hybrid |
adjustable rate 952.8 950.7 (2.1) | 950.7 922.5 28.2
-----------------------------------------------|----------------------------
Total Agency MBS $ 1,178.0 $ 1,176.1 $ (1.9) | $1,176.1 $ 1,137.8 $ 38.3
----------------------------------------------------------------------------
(1) Some of these trades settled subsequent to the end of the first quarter
of 2008
Prime RMBS Investment Portfolio
At March 31, 2008, Crystal River's prime RMBS portfolio totaled
$56.3 million and had an average credit rating of B.
Prime RMBS portfolio at March 31, 2008:
----------------------------------------------------------------------------
Weighted Average
--------------------------
($ in millions) Amortized Cost Carrying Value Book Yield Term (Yrs)
----------------------------------------------------------------------------
BBB $ 9.1 $ 9.1 21.9% 4.2
BB 14.4 14.4 49.3% 6.0
B 23.8 23.8 85.2% 6.4
Below B 8.9 9.0 169.6% 3.8
----------------------------------------------------------------------------
Total Prime RMBS $ 56.2 $ 56.3 79.1% 5.5
----------------------------------------------------------------------------
Subprime RMBS Investment Portfolio
At March 31, 2008, Crystal River's subprime RMBS portfolio
totaled $28.0 million. Of that amount, $21.4 million was from the
2005 vintage, $5.6 million was from the 2006 vintage and $1.0
million was from the 2007 vintage. The subprime RMBS securities had
an average credit rating of BB-.
Subprime RMBS portfolio at March 31, 2008:
----------------------------------------------------------------------------
Weighted Average
-----------------------
($ in millions) Amortized Cost Carrying Value Book Yield Term (Yrs)
----------------------------------------------------------------------------
BBB $ 9.7 $ 9.8 21.8% 2.5
BB 4.0 4.0 39.0% 0.8
B and below 14.1 14.2 37.4% 1.4
----------------------------------------------------------------------------
Total Subprime RMBS $ 27.8 $ 28.0 32.2% 1.7
----------------------------------------------------------------------------
GAAP Book Value
Effective January 1, 2008, Crystal River adopted Statement of
Financial Accounting Standards ("SFAS") 159, a new fair-value
accounting standard that permits the Company to carry both the
assets and liabilities of its two CDO entities at their fair values
going forward. As a result, all unrealized gains and losses on the
available for sale securities held within the Company's CDOs, the
corresponding CDO liabilities, and swaps previously designated as a
hedge are recorded directly into earnings in the Company's
consolidated statements of operations. Under SFAS 159, the Company
had a one-time cumulative-effect balance sheet adjustment of $181.1
million. The amount reflects the initial application of the
standard. Due to the continued widening of yield spreads and the
resulting market value adjustments to the carrying value of the
Company's available for sale securities, GAAP common equity book
value per share was $5.37 at March 31, 2008.
Financing
In connection with the Company's Agency MBS disposition, Crystal
River raised net cash of $38.3 million, reduced the borrowings
against its funding facilities to $48.2 million, and reduced its
repurchase debt outstanding from $1.3 billion at year-end to $28.1
million after trade settlement. The Company has and will continue
to work to match-fund its assets and liabilities. Following the
settlement of the Agency MBS sale in late April, 95.5% of Crystal
River's debt was term-financed through CDO debt, other term debt,
and funding facilities.
Financing Details - Asset Side
The table below summarizes the breakdown of our available for
sale securities between assets held by non-recourse securitization
subsidiaries financed by CDO debt and assets held directly at March
31, 2008:
----------------------------------------------------------------------------
Consolidated
($ in millions) Carrying Value Securitized Assets Non-securitized Assets
----------------------------------------------------------------------------
Agency MBS $ - $ - $ -
CMBS 271.1 209.7 61.4
Prime RMBS 56.3 28.0 28.3
Subprime RMBS 28.0 18.3 9.7
ABS - - -
Preferred Stock 0.1 - 0.1
----------------------------------------------------------------------------
Total $ 355.5 $ 256.0 $ 99.5
----------------------------------------------------------------------------
Financing Details - Liability Side
The following table shows the Company's available for sale
securities, real estate loans, and other investments as of March
31, 2008, and the different lines used to finance such assets,
categorized by (i) CDO debt, (ii) other term debt, such as mortgage
loans on commercial real estate and trust preferred securities,
(iii) funding facilities, which include warehouse lines and term
bank facilities, and (iv) reverse repurchase agreements:
----------------------------------------------------------------------------
Assets Debt
----------------------------------------------------------------------------
Carrying CDO Other Term Funding Repurchase
($ in millions) Value Debt(1) Debt Facilities Agreements
----------------------------------------------------------------------------
CMBS $ 271.1 $ 156.7 $ - $ 0.4 $ 25.4
Prime RMBS 56.3 15.8 - 13.3 1.9
Subprime RMBS 28.0 10.3 - 0.7 0.8
CDO Notes - - - 2.0 -
Preferred Stock 0.1 - - 0.3 -
Real estate loans 158.1 - 99.1 24.5 -
Commercial real
estate 233.1 - 219.4 6.0 -
Real Estate
Finance Fund - - - - -
Trust Preferred
Securities - - 51.6 - -
Other(2) 1.6 - - 1.0 -
----------------------------------------------------------------------------
Subtotal $ 748.3 $ 182.8 $ 370.1 $ 48.2 $ 28.1
----------------------------------------------------------------------------
Agency MBS(3) - - - - 380.6
----------------------------------------------------------------------------
Total $ 748.3 $ 182.8 $ 370.1 $ 48.2 $ 408.7
----------------------------------------------------------------------------
(1) CDO debt has been allocated based upon the asset mix within the
Company's CDOs
(2) The $1 million in debt under Funding Facilities is a retained portion
of preferred equity in one of Crystal River's CDOs. This amount is
eliminated upon consolidation of our balance sheet, and hence is not
included in the Asset Carrying Value
(3) These trades settled in April 2008; assets are contained in
"due from broker" on Crystal River's balance sheet; after trade
settlement, the Agency MBS repurchase balance was repaid
V. OTHER INFORMATION
The Company will file its Form 10-Q for the quarter ended March
31, 2008 with the Securities and Exchange Commission on Monday, May
12, 2008. Please read the Form 10-Q carefully as it contains
Crystal River's consolidated financial statements and notes thereto
and Management's Discussion and Analysis of Financial Condition and
Results of Operations. The Form 10-Q also will be made available
under the Investor Relations section of Crystal River's website at
www.crystalriverreit.com.
Definition of Operating Earnings
This press release and accompanying financial information make
reference to operating earnings on a total and per share basis. The
Company considers its operating earnings to be income after
operating expenses and loan loss provisions but before realized and
unrealized gains and losses, hedge ineffectiveness, foreign
currency exchange impact, loss on impairment of assets and
commercial real estate depreciation and amortization. The Company
believes operating earnings provides useful information to
investors because it views operating earnings as an effective
indicator of the Company's profitability and financial performance
over time. Operating earnings can and will fluctuate based on
changes in asset levels, funding rates, available reinvestment
rates, expected losses on credit-sensitive positions and the return
on the Company's investments as the underlying assets are carried
at estimated fair value. The Company has provided the components of
operating earnings and a full reconciliation from net income (loss)
to operating earnings with the financial statements accompanying
this press release. Operating earnings is a non-GAAP measure that
does not have any standard meaning prescribed by GAAP and therefore
may not be comparable to similar measures presented by other
companies.
Definition of Net Investment Income
This press release and accompanying financial information make
reference to net investment income on a total and per share basis.
The Company considers its net investment income to be total
revenues including income from equity investments less interest
expense. The Company believes net investment income provides useful
information to investors because it represents the largest
component of the Company's operating earnings, which management
believes is an effective indicator of the Company's profitability
and financial performance over time. The Company provides the
components of net investment income with the financial statements
accompanying this press release. Net investment income is a
non-GAAP measure that does not have any standard meaning prescribed
by GAAP and therefore may not be comparable to similar measures
presented by other companies.
Definition of Estimated REIT Taxable Income
Estimated REIT taxable income is a non-GAAP financial measure
and does not purport to be an alternative to net income determined
in accordance with GAAP as a measure of operating performance or to
cash flows from operating activities as a measure of liquidity.
Estimated REIT taxable income excludes the undistributed taxable
income of Crystal River's domestic taxable REIT subsidiary. This
non-GAAP financial measure is important to Crystal River and its
stockholders because, as a real estate investment trust, we are
required to pay substantially all of our REIT taxable income in the
form of distributions to our stockholders and estimated REIT
taxable income is an effective indicator of the total amount of
REIT taxable income available for distributions. Because not all
REITs use identical calculations, this presentation of estimated
REIT taxable income may not be comparable to other similarly titled
measures prepared and reported by other companies. The Company
provides a full reconciliation from net loss to estimated REIT
taxable income with the financial statements accompanying this
press release.
Forward-Looking Information
This news release, and our public documents to which we refer,
contain or incorporate by reference certain forward-looking
statements within the meaning of Section 27A of the Securities Act
of 1933, as amended, and Section 21E of the Securities Exchange Act
of 1934, as amended, including statements relating to our future
financial results. Forward-looking statements that are based on
various assumptions (some of which are beyond our control) may be
identified by reference to a future period or periods or by the use
of forward-looking terminology, such as "may," "will," "believe,"
"expect," "anticipate," "continue," "should," "intend," or similar
terms or variations on those terms or the negative of those terms.
Although we believe that the expectations contained in any
forward-looking statement are based on reasonable assumptions, we
can give no assurance that our expectations will be attained.
Factors that could cause actual results to differ materially from
those set forth in the forward-looking statements include, but are
not limited to, changes in interest rates, changes in yield curve,
changes in prepayment rates, the effectiveness of our hedging
strategies, the availability of mortgage-backed securities and
other targeted investments for purchase and origination, the
availability and cost of capital for financing future investments
and, if available, the terms of any such financing, changes in the
market value of our assets, future margin reductions and the
availability of liquid assets to post additional collateral,
changes in business conditions and the general economy, competition
within the specialty finance sector, changes in government
regulations affecting our business, our ability to maintain our
qualification as a real estate investment trust for federal income
tax purposes, and other risks disclosed from time to time in our
filings with the Securities and Exchange Commission. For more
information on the risks facing the Company, see the risk factors
in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal
year ended December 31, 2007, which we filed with the SEC on March
13, 2008, and the risk factors in Exhibit 99.1 to our Form 10-Q for
the period ended March 31, 2008, which we expect to file with the
SEC on May 12, 2008. We do not undertake, and specifically disclaim
any obligation, to publicly release any update or supplement to any
forward-looking statements to reflect the occurrence of anticipated
or unanticipated events or circumstances after the date of such
statements.
Contacts: Crystal River Capital, Inc. Marion Hayes, Investor
Relations (212) 549-8413 Email: mhayes@crystalriverreit.com
Website: www.crystalriverreit.com (CRZ-F)
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