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Strategies & Market Trends : The Thread Formerly Known as No Rest For The Wicked -- Ignore unavailable to you. Want to Upgrade?

To: Glenn who wrote (2920)	12/11/1998 10:10:00 AM
From: Ernest Poe	Respond to of 90042

CMO! Home What's New Stock Quotes Real-Time Delayed Indexes Movers Real-Time Delayed News Research Symbol Search Your Stock List Help AOL Help FAQs Partners Glossary Links Please visit our sponsors! DJIA 8789.31 -52.27 NASDAQ 2014.2 -1.76 S&P 500 1159.27 -5.75 30 Yr Bond 4.932 -0.02 What's moving today? Check out our Movers and Shakers to find out! Setup your personalized stock list. CAPSTEAD MTG CORP (NYSE: CMO) Quote, Profile, History, News, Chart, Zacks, MarketGuide, StockTalk News December 10, 17:43 Eastern Time DALLAS, Dec. 10 /PRNewswire/ -- Capstead Mortgage Corporation (NYSE: CMO) today announced that its affiliate Capstead Inc. has entered into agreements for the sale of its mortgage banking operations to two affiliates of GMAC Mortgage Group, Inc., (a wholly-owned subsidiary of General Motors Acceptance Corporation ("GMAC")) for aggregate cash consideration to Capstead of more than $550 million. The sale is expected to produce a modest gain in the fourth quarter of 1998. Commenting on the sale, Ronn K. Lytle, chairman and chief executive officer, said "The decision to sell the mortgage banking operations reflects continued uncertainty relative to the financial markets, in particular the mortgage finance market. In light of these conditions, we concluded that securing sufficient additional financing to continue to grow the mortgage servicing operation currently represents too great a risk for our stockholders. This conclusion has been particularly difficult because our colleagues at Capstead Inc., through innovation, dedication and hard work, have, over the past five years, built one of the finest mortgage servicing operations in America. We look forward to seeing them continue to prosper in their careers and winning ways under the GMAC umbrella." The sale to GMAC Mortgage Corporation of Capstead Inc.'s approximately $38 billion single-family mortgage servicing portfolio, including the conveyance of certain related hedging instruments, is expected to close in late December 1998. The sale of the servicing platform and related assets to Homecomings Financial Network, Inc., a wholly-owned subsidiary of Residential Funding Corporation ("RFC"), is expected to close before the end of the first quarter in 1999. Capstead Inc. has had a long-term alliance with RFC, currently subservicing approximately $18.6 billion of RFC's single-family mortgage loans. After retiring indebtedness related to its mortgage servicing portfolio, related hedge instruments and loan production financing, and certain transaction costs, the sale is expected to generate net cash proceeds of approximately $500 million. Of these proceeds, $26.5 million will be held in escrow for a period of up to eighteen months to secure indemnifications related to the sale. Mr. Lytle commented, "The sale significantly bolsters the Company's balance sheet and reduces its exposure to further declines in long-term interest rates. In addition, the Company has continued its repositioning efforts in order to further improve its credit profile by reducing short-term borrowings and focusing its investment portfolios on high quality mortgage- backed securities." By year-end, the Company's mortgage investments will consist almost exclusively of approximately $2.2 billion of Fannie Mae, Freddie Mac and Ginnie Mae mortgage-backed securities financed with approximately $2.1 billion of short-term borrowings. Short-term borrowings will have declined from $7.8 billion at March 31, 1998 and $3.9 billion at September 30, 1998. Its leverage ratio is expected to be approximately 3.1:1. The Company has not yet determined its plans to employ all of the net cash proceeds, and may consider increasing its investment portfolios of high quality mortgage-backed securities, purchasing preferred and/or common stock of the Company or acquiring other qualified investments. The Company expects to pay dividends on its preferred stock. Merrill Lynch & Co. and Cohane Rafferty Securities, Inc. advised the Company and Capstead Inc. on the sale of the mortgage banking operations. Note: This document contains "forward-looking statements" (within the meaning of the Private Securities Litigation Reform Act of 1995) that inherently involve risks and uncertainties. The Company's actual results and liquidity could differ materially from those anticipated in these forward- looking statements as a result of unforeseen external factors. As discussed in the Company's filings with the Securities and Exchange Commission, these factors may include, but are not limited to, changes in general economic conditions, fluctuations in and market expectations for fluctuations in interest rates and levels of mortgage prepayments, liquidity of credit markets, increases in costs and other general competitive factors. SOURCE Capstead Mortgage Corporation