Re: TAXI
Paul, I just found this regarding TAXI at bdcreporter.com. a site Crossy mwntioned.
"Medallion Financial (TAXI) is a BDC which has both a finance company arm making medallion loans for taxis (hence the cute ticker) and commercial loans, as well as owning a bank. More recently, and without much fanfare, Medallion Financial (TAXI) cut its long-standing quarterly pay-out of 19 cents a share to 15 cents for the IVQ of 2009. We had seen this one coming as Medallion has been de-leveraging its non-bank subsidiaries for several quarters, despite the good performance of its taxi medallion loans. Then there was the reckoning TAXI had to take for its failed and quixotic investment in special purpose acquisition corporations (or SPACS), a feature of the go-go years. The Company established a valuation allowance of $9.342mn for the SPACs, which have ceased operations. That suggests we shouldn’t be expecting any recoveries. To put this into perspective, the provision was equal to over 50% of the prior year’s Net Investment Income, and cut 2009's returns in half.
Medallion is increasingly focusing its energies on growing assets in its wholly owned bank subsidiary, where low cost deposits fund the assets. The finance company, by contrast, is finding it difficult to find appropriate financing at a price that it can afford. The result is ever decreasing assets, either from run off or selling the loans to the bank or third parties. For shareholders of TAXI the increasing importance of the bank subsidiary makes the maintenance of the dividend more insecure. As a bank, TAXI has to defer to the FDIC, which has lent the bank funds under the famous TARP program. However, the regulators have put express and implicit limits on the amount of dividends the bank can pay to its parent, and thereby to its shareholders. We’re worried that at some point TAXI might be forbidden by the regulators from paying out any dividend from its bank should concerns arise about capital adequacy or any number of other considerations. Given the relatively low yield being received by TAXI shareholders at the current price of $8.07, and little prospects for growth outside the bank, we’re not sure Medallion Financial is worth the risk at this price level." |
