UPDATE 1-Alesco to not pay Q3 cash dividend

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Sept 11 (Reuters) - Alesco Financial Inc (AFN.N), a real estate investment trust, said it suspended its cash dividend for the third quarter, and that it bought back more than 56 percent of its convertible debt.

Previously disclosed tax losses would eliminate any taxable income for 2008, including book gains resulting from the buyback of the convertible debt, the Philadelphia-based company said.

As a result, the regular cash dividend of 25 cents would not be paid in the third quarter.

In July Alesco had said it expected the seizure of IndyMac Bancorp Inc, in which it held preferred securities, would result in it recording a realized tax loss of about $86 million.

Alesco said it bought back $78.8 million aggregate principal amount of its 7.625 percent contingent convertible senior notes due 2027 for $33.0 million in cash, or an average price of $41.8 from the open market as well as privately negotiated transactions. The company expects to record $45.8 million in book gains in the third quarter from the buyback. The company had $90 million available unrestricted cash after completing the debt buyback, CEO James McEntee said in statement.

Shares of the company closed down almost 15 percent at 91 cents Thursday on the New York Stock Exchange. (Reporting by Amiteshwar Singh in Bangalore; Editing by Pratish Narayanan)