IndyMac posts loss, halts payments on securities
NEW YORK (Reuters) - IndyMac Bancorp Inc IMB.N, one of the largest independent U.S. mortgage lenders, posted a steeper-than-expected first-quarter loss on Monday and said it would halt interest and dividend payments on some securities.
Ratings agency Standard & Poor's downgraded IndyMac's debt, and the company's shares tumbled nearly 11 percent on concern about the lender's capital levels. The lender also said it did not expect to return to profitability this year.
"The deferral on their trust preferred securities is indicative of them being in dire straits," said Jason Arnold, an analyst at RBC Capital Markets. "Certainly their capital levels are quite weak at this point."
IndyMac Chief Executive Michael Perry, in an interview, called the lender "a well capitalized financial institution."
He also said the company was "looking at lots of different things to see if we can raise capital."
Still, he acknowledged that was a challenge.
"In this environment, until things improve, our best bet would be to continue to strengthen our balance sheet a little bit, and raise capital through our direct stock purchase plan," he said, referring to a plan that allows individual investors to buy the company's shares directly.
The worse-than-expected loss, along with the interest payment suspension and a dim outlook sent IndyMac shares down more than 10 percent.
The news also sent shares in Alesco Financial Inc AFN.N, a real estate investment trust that holds some IndyMac preferred securities through collateralized debt obligations (CDOs), tumbling 27 percent.
S&P RATINGS CUT
The loss of $184.2 million, or $2.27 a share, came as it wrote down bad mortgages and grappled with the cost of cutting jobs and closing offices. In the year-earlier quarter, it had a profit of $52.4 million, or 70 cents a share.
Analysts looked for a loss of $1.92 a share, according to Reuters Estimates.
IndyMac has suffered as the nation's housing slump has extended beyond subprime mortgages into the medium- and higher-quality loans in which IndyMac has long specialized.
The company long specialized in below-prime "Alt-A" home loans, which often go to people who cannot fully document income or assets.
Pasadena, California-based IndyMac, whose shares have tumbled 49 percent this year, expects its quarterly loss to narrow to $20 million by the fourth quarter.
Nonperforming assets rose 39 percent on a sequential basis to $2.1 billion in the quarter, though the company said the increase was at a slower rate than in the previous quarter.
S&P, which lowered its rating on IndyMac to 'B/C' from BB+/B," said it was "concerned that continued increases in problem assets and increasingly high charge-off levels will leave the company unable to get ahead of its asset quality problems."
IndyMac said deferring the interest on its trust preferred securities issued by its holding company would improve its cash flow by $7.4 million per quarter. Suspending the dividends on its perpetual preferred stock would preserve capital of $10.6 million per quarter, IndyMac said.
The company said it viewed both moves as temporary and that interest payments and dividends on the respective securities would resume "once the market stabilizes and IndyMac returns to solid profitability."
The stock fell 37 cents to $3.06 on the New York Stock Exchange.
Alesco said the five CDOs that held IndyMac trust preferreds contributed $8.2 million, or 41 percent of its adjusted earnings for the first quarter.
(Reporting by Christian Plumb, editing by John Wallace/Jeffrey Benkoe)
