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Non-Tech : Cityscape Financial (CTYS) -- Ignore unavailable to you. Want to Upgrade?

To: Shane Stump who wrote (1287)	10/22/1997 11:53:00 AM
From: Greg	Respond to of 2544

Everyone needs to take a step back and try to see through the fog. The real question at this point is survival of the company. If the company survives what can they realistically earn. The triple digit growth over the last few years came at a price, neg cash flow. This was OK as long as they had access to cheap capital. With cheap capital they choose to securitize loans instead of selling loans to make @10% vs 6 to 7%. Securitizing loans is much more profitable but costs @4.5% up front.It is more profitable because the cash flow stream (also @ 4.5%) lasts as long as rhe loan is outstanding. If you do the math and believe the company when they say the avg loan is 200 months long and the assumed avg life of $1.00 loaned after prepayment and default assumptions is 4 1/2 years, 10% has to be conservative. The future income stream of the loans already securitized comes in every month. If all the conv pfd shareholders convert (and they will) the shares outstanding could reach 50 million. If selling loans cuts their profits in half (@ 30 million) $2 to $3 looks cheap by any reasonable measure, book value or P/E. The wild cards are the UK situation and confidence in management. On a positive side KDP High Yield research reiterated their BUY on the senior notes this morning. Greg