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Microcap & Penny Stocks : Tokyo Joe's Cafe / Societe Anonyme/No Pennies -- Ignore unavailable to you. Want to Upgrade?

To: Jane4IceCream who wrote (5794)	10/8/1998 12:42:00 PM
From: NASDBULL	Respond to of 119973

More corporate warnings on sub-prime lenders. Old news but VERY informative. <<<<<<<<<<<<<<<<<<<<<<< Another reminder of the need to comply with Company policy as to > collected escrow funds came today. > > Criimi Mae, Inc., a publicly traded REIT with a $445 million year end > 1997 book value, who had in its portfolio $1.57 billion in BB rated or > lower (subprime) rated commercial mortgage securities, filed for > Chapter 11 bankruptcy today. They had pledged mortgage backed > securities as collateral for loans and as the value of those > securities has plummeted recently, collateral calls were made that > Criimi Mae was unable to meet. Since Criimi Mae was a purchaser of > mortgage securities and not an originator, it is doubtful that we will > have escrows with uncollected funds from Criimi Mae. > > Of concern, however, is the effect of the bankruptcy. Bloomberg noted > in its October 5, 1998 article on the filing > "Trading of "BB" rated commercial mortgage securities was > virtually "still" after Criimi Mae's announcement, Callahan said. The > yeild premium those issues pay over Treasuries widened about 100 basis > points during the past two weeks to 500 basis points. That spread is > likely to widen to 600 basis points as the impact of Criimi Mae's > filing is absorbed by the market, he said." > > In English, the interest rate that the market requires on lower rated > paper is 5 points higher than what it is looking for with Treasuries > and may jump another point. Companies needing to sell lower grade > paper that was originated with interest rates under 10 per cent will > have to sell it at a larger discount, assuming buyers are available. > Other companies with lower grade paper as securities may also be > facing margin calls.