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Non-Tech : Cityscape Financial (CTYS)
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To: Ploni who wrote (1662)11/15/1997 8:43:00 PM
From: Rational   of 2544
 
Chas:

CTYS must have added to the over-collateralization requirement of the trust to compensate for the bad loans. This must be one of the causes for taking a charge of $90 + mil this quarter. [This is approximately equal to the 100 mil non-performing loans they had reported earlier that has gone out to Ocwen. I can now see that this was perhaps brewing underneath while we were in the dark: a threat to cut the trust bond ratings unless CTYS did something.] These ratings protect debtholders. The main question is: what is the residual value allocable to equityholders?

I would be very excited if the Cityscape corporate debt rating is increased by any rating agency because that would tell us that the riskiest debtholders will be protected and perhaps equityholders will have some residue. Thus reaffirmation of the ratings of the trust is good news to debtholders and has no new information for equityholders beyond what CTYS has already declated on Friday, IMO.

Sankar

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