Business Context and Reporting Period
Company: Chimera Investment Corporation
Filing Type: Form 8-K (Current Report)
Date of Report: October 14, 2008
Reporting Period: Third Quarter ended September 30, 2008
Context: The Company announced portfolio management actions taken in response to declining asset values and adverse changes in financing costs and availability during the third quarter of 2008.
Key Financial Metrics
- Asset Sales: Sold AAA-rated non-Agency residential mortgage-backed securities (RMBS) with a carrying value of $432.5 million.
- Derivatives Termination: Terminated $983.4 million in interest rate swaps.
- Realized Losses: Approximately $113.0 million from asset sales and $10.5 million from swap terminations.
- Total Liabilities: Approximately $1.1 billion as of September 30, 2008.
- Debt Composition: $620 million under a repurchase agreement with Annaly Capital Management, Inc., and $499 million in securitized liabilities.
- Book Value Per Share: Estimated at approximately $6.15 as of September 30, 2008.
Note: The filing does not provide specific values for total revenue, net income, operating cash flow, or profit margins for the period.
Material Changes
The primary material change reported is the significant reduction in portfolio assets and the recognition of substantial realized losses due to market conditions. The Company actively sold $432.5 million in assets and unwound nearly $1 billion in interest rate swaps, resulting in combined realized losses of approximately $123.5 million.
Outlook, Risks, and Management Commentary
Management Commentary: Management stated that the portfolio steps were a direct response to "declining asset values and adverse changes in the cost and availability of financing."
Risks and Contingencies: The filing highlights ongoing liquidity and valuation risks associated with the non-Agency RMBS market and the cost of financing. The reliance on a repurchase agreement with Annaly Capital Management, Inc. for a significant portion of liabilities ($620 million) represents a concentration risk.
Investor Verification Checklist
- Verify the current market value of the remaining non-Agency RMBS portfolio post-sales.
- Confirm the terms and availability of the $620 million repurchase agreement with Annaly Capital Management, Inc.
- Review the full press release (Exhibit 99.1) for details on the specific assets sold and the remaining liquidity position.
- Assess the impact of the $123.5 million in realized losses on the Company's capital adequacy and future dividend capacity.