Club chiefs eager for financial controls

Premier League club chairman and chief executives will push for new rules to help control spiralling players salaries, escalating transfer fees and out of control agent payments in a September summit, ESPN can reveal.

With only seven of the 20 elite clubs proving profitable, despite the enormous sums pouring into the game, officials will meet to discuss tackling Premier League finances head on, with some form of salary cap on the agenda at the Future of the Game conference.

Phillip Beard, chief executive of QPR, told ESPN: The game is so competitive it tempts clubs to push their financial boundaries, so the challenge is how to manage them as each club is a different size and scale to the next. There are different forms of investment so the detail has to be very carefully worked out.

But I agree that no one is immune to what has happened to Glasgow Rangers and Portsmouth, and it is not healthy if 13 or 14 clubs in the Premier League are not profitable, but you have to look at Manchester City who made a loss last season yet they are the wealthiest club in the world.

The fact is that clubs want to manage their own business and not be told how to manage and run their business, and while we wont get to where the States have no promotion or relegation, salary caps and a draft system, it is clear that a club like QPR need to be party to whatever discussions will take place, and how best to use the new TV money coming in.

However, it is clear that everybody wants to find a route to run football in a sensible business way.

But while Beard is happy to take the middle ground, others owners want a salary cap, which could take the form of a collective percentage of turn over or a spend limit.

Other Premier League club chiefs have also commented on the situation to ESPN in recent weeks.

Dave Whelan, the Wigan chairman, said: We all agree that there now needs to be controls over wages, even Manchester United agree. Manchester City have frightened everybody, they have blown everyone out of the water with the levels of salaries they are paying

David Gill has made it clear he would support some kind of control, how the controls are put into place is the tricky bit. Personally I wouldnt be afraid to take the toughest route of all and have a ceiling on how much each club can pay in wages; a salary limit needs to be enforced.

It would make our league even more competitive, it isnt a means of bringing the top clubs down to our level. We would have a limit that clubs like Wigan would never reach.

So far only the Football League have implemented rules governing the finances of clubs, and those failing to live within their means risk a transfer embargo and heavy fines. Whether the Premier league clubs will want to put into play such disciplinary safeguards remains to be seen.

Stoke chairman Peter Coates said: The object, and this is the huge challenge in front of us all, is run football clubs in a responsible manner, and the fact that clubs have been run with huge debts in the past doesnt make it right, nor makes it something that doesnt need to be addressed, it does

I believe the clubs are now up to meet the challenge. It might be a complicated formula that is required, but it is something that the clubs can devise amongst themselves.

There has been a tremendous hike in Premier League earnings … that increase in income keeps coming while half or more than half of the Premier League clubs are not running into profit. Something is wrong there.

The Football League have implemented new rules and we have to take a close look at what we need to do in the Premier league. There is a Financial Fair Play rule in Europe but that only governs about eight of our clubs, so we need a sensible dialogue with all of our clubs to find the way forward.

The goal is simple – that all clubs in the Premier League are self sustainable. I am sure we are all up to meeting that challenge.

The shareholders meetings of the Premier League clubs will take place on September 11.

MFA Financial’s CEO Discusses Q2 2012 Results – Earnings Call Transcript

MFA Financial, Inc. (MFA) Q2 2012 Earnings Results Conference August 6, 2012 10:00 AM ET


Ladies and gentlemen, thank you for standing by. Welcome to the MFA Financial Inc. Second Quarter 2012 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Instructions will be given at that time. (Operator Instructions) As a reminder, this conference is being recorded.

I’d now like to turn the conference over to our host Ms. Alexandra Giladi. Please go ahead.

Alexandra Giladi

Good morning. The information discussed on this conference call today may contain or refer to forward-looking statements regarding MFA Financial, Inc., which reflects management’s beliefs, expectations and assumptions as to MFA’s future performance and operations.

When used, statements that are not historical in nature including those containing words such as will, believe, expect, anticipate, estimate, plan, continue, intend, should, could, would, may or similar expressions are intended to identify forward-looking statements. All forward-looking statements speak only as of the date on which they’re made.

These types of statements are subject to various known and unknown risks, uncertainties, assumptions, and other factors including, but not limited to those relating to changes in interest rates and the market value of MFA’s investment securities; changes in the prepayment rates on the mortgage loans securing MFA’s investment securities; MFA’s ability to borrow to finance its assets; implementation of or changes in government regulations or programs affecting MFA’s business; MFA’s ability to maintain its qualification as a real estate investment trust for federal income tax purposes; MFA’s ability to maintain its exemption from registration under the Investment Company Act of 1940, and risks associated with investing in real estate related assets, including changes in business conditions and the general economy.

These and other risks, uncertainties and factors, including those described in MFA’s Annual Report on Form 10-K for the year ended December 31, 2011 its quarterly report from 10-Q for the quarter ended March 31, 2011 and other reports that it may file from time-to-time with the Securities and Exchange Commission could cause MFA’s actual results to differ materially from those projected, expressed, or implied in any forward-looking statements they make.

For additional information regarding MFA’s use of forward-looking statements, please see the relevant disclosure in the press release announcing MFA’s second quarter 2012 financial results. Thank you for your time.

I’d now like to turn this call over to Stewart Zimmerman, MFA’s Chief Executive Officer.

Stewart Zimmerman

Good morning and welcome to MFA’s second quarter 2012 earnings call. With me this morning are Bill Gorin, President; Steven Yarad, Chief Financial Officer; Ron Freydberg, Executive Vice President; Craig Knutson, Executive Vice President; Harold Schwartz, Senior Vice President and General Counsel; Kathleen Hanrahan, Senior Vice President and Chief Accounting Officer; Shira Finkel, Senior Vice President; and Goodmunder Christiansen, Vice President.

Today we announced financial results for the second quarter ended June 30, 2012. Recent financial results and other significant highlights for MFA include the following. Second quarter net income per common share of $0.20 or earnings per common share. Book value per common share of $7.45 as of June 30, 2012 compared to $7.49 as of March 31, 2012.

We continue to focus on adding longer term financing for our Non-Agency mortgage-backed security holding. On June 29, 2012 we added $350 million three-year repurchase agreement to finance Non-Agency MBS assets.

On July 31, 2012 we paid our second quarter 2012 dividend of $0.23 per share of common stock to stockholders of record as of July 13, 2012. Our REIT taxable income exceeded core earnings in the first half of 2012, primarily due to the fact that for Non-Agency MBS acquired at a discount, core earnings are reduced by credit reserves for estimated future losses while taxable income is reduced by realized losses only when they actually occur.

We typically distribute approximately 100% of a REIT taxable income and consequently, dividends exceeded core earnings in the first two quarters of 2012. We currently anticipate that our REIT taxable income and core earnings will trend closer together in the second half of 2012.

At quarter end our debt-to-EBIDA ratio including the liabilities underlying our linked transactions was 3.6:1. In this low interest rate environment, core earnings per share was $0.20 versus $0.21 in the first quarter. Our Agency portfolio had an average amortized cost of 102.9% of par as of June 30, 2012, and generated a 2.95% yield in the second quarter.

Our Non-Agency portfolio had an average amortized cost of 73.0% of par as of June 30, 2012, and generated a loss-adjusted yield of 6.75% in the second quarter. While housing fundamentals remain moderate to weak, we believe that we’ve appropriately factored this into our cash flow projections and credit reserve estimates. Our Non-Agency mortgage-backed security loss adjusted yield of 6.75% is based on projected defaults that are approximately twice the amount of underlying mortgage loans that are presently 60 plus days delinquent.

These underlying mortgage loans were originated on average more than six years ago so that we have access to an average of 74 months of payment history. In the second quarter we continued to add multi-year financing that serves to reduce our reliance on short-term funding for Non-Agency mortgage backed securities. While this longer-term financing is incrementally more expensive than short-term financing by approximately 100 basis points, we believe the certainty of the committed term more than justifies the additional cost.

Before I turn the call over for questions, I just wanted to give a brief mention to the recently publicized proposals that are being considered by some county and local governments and particular San Bernardino County, California, to use the power of eminent domain to seize certain mortgages from existing mortgage holders.

Although these proposals are still in their preliminary stages and we do not yet know whether they will ultimately be acted upon, we’re taking this matter very seriously and are working with other mortgage investors and trade groups to make sure that our voice is heard in this debate, with the objective of protecting the interest of our stockholders.

I thank you for your continued interest in MFA Financial and at this time I’d like to open the call for questions. Operator?


Yes, sir. I’m here.

Stewart Zimmerman

We would like to open the call for questions, please.

Grandma’s New Financial Problem: College Debt

Its no secret that falling behind on student loan payments can squash a borrowers hopes of building savings, buying a home or even finding work. Now, thousands of retirees are learning that defaulting on student-debt can threaten something that used to be untouchable: their Social Security benefits.

Financial Markets: There May Have Been Life Here Once

Theres just nothing like August in the financial markets, unless it is the barren landscape that is Mars. I think there may have been life here, once! one muses with wonder, scanning the bleak horizon for some sign of motion. Well, nothing today. Maybe well find something tomorrow.

Markets were nearly unchanged across the board from stocks (+0.2% Samp;P), bonds (-0.5bps in the 10y), and commodities (+0.1% DJUBS), and on low volume. Gone, but not forgotten, was the robust equity rally from Friday. Regardless of what you may have heard, the rally in equities that day was not due to the Employment data, which was weak.

While Payrolls surprised on the upside, that was mainly due to rotten forecasting one auto maker didnt lay off workers during the seasonal re-tooling period, leaving the BLS seasonal factors to replace workers that hadnt been laid off as they usually are. (By the way, this means that the seasonal factors will expect those workers to be added back next month but since they werent ever laid off, the seasonal factors will bias the number lower next month). We knew this effect was there thats why the Initial Claims number plunged 25k in early July, only to bounce 36k and then plunge 31k again. Economists just forgot to add it.

There was nothing game-changing, in short, in the Employment report. A better-than-expected Payrolls increase was not particularly exciting once revisions to prior months and the re-tooling effect are accounted for, and the Unemployment Rate ticked up very slightly (8.254% rounded higher, but was very close to unchanged).

What had pushed the market higher was a surge of optimism about the EFSF again, because some members of Frau Merkels party although pointedly not Merkel and not the Bundesbank either expressed a vague acceptance of the ECB buying periphery bonds. But how strong is that acceptance? One speaker said German lawmakers would have veto rights over bond purchases by the EFSF and ESM. How would that work, exactly? It sounds to me as if someone was promised something that cannot actually be delivered. Obviously not everyone can have veto rights over the bond purchases, or else they wont make any bond purchases!

Some observers were surprised that the Knight Capital (KCG) imbroglio did not meaningfully impact market direction, but market professionals generally knew better. Knight Capitals problem was nothing like the problems experienced by Long Term Capital or a primary dealer like MF Global. All three of those entities put capital at risk on a regular basis, but heres the fundamental difference: no one needs to have confidence in Knight to deal with the company, since you dont face its credit. You have probably faced Knight numerous times in the market but never knew it, as the company is an exchange market-maker.

Consequently, Knight doesnt have lots of interconnections to other firms that need to be collateralized and can be called. In this respect, the damage done by a Knight insolvency, if it had happened, would have been much more like the collapse of Amaranth, which was a hedge fund that largely dealt in futures markets. No one faced Amaranth (at least, in futures). And similarly, few institutions had exposures to Knight. So if you owned Knight shares, you were hurt badly; but the market continued to function. And over the weekend, Knight got more capital (since its fundamental business model isnt really in question), and is back to business as usual, for the most part.

Consider this Exhibit 2,375 in favor of pushing as many instruments as possible onto exchanges.

So we move onward, but were left with one overarching truth: its August. That doesnt mean that the markets wont move in fact, illiquid market conditions often produce ample moves (as Friday illustrated). It does mean that the news cycle, which in the last couple of years has been primarily Europe-driven, will probably slow to a relative crawl.

Disclosure: No positions

Investors Seek Out Safer Shores

The pine-accented Manhattan outpost of Norway’s biggest bank, high in a Midtown skyscraper, is an unlikely shelter in a global financial storm.

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Ozier Muhammad/The New York Times

The New York offices of DNB, Norway’s biggest bank, have expanded in recent years to deal with new activity.

The bank, DNB, like its home country, has experienced a rush of money from American investors looking for safety while they wait out the debt crisis in Europe and slowing economic growth in America and China. Just about every day, the front desk receptionist at DNB takes cold calls from investors wanting to buy Norway’s bonds or some other asset tied to Scandinavia’s healthy economy.

“A few years ago, these people wouldn’t have known where Norway was on the world map,” said Clifford Queen, a DNB bond trader in New York.

Government bonds issued by the United States, Germany and Japan are still the primary havens for scared investors around the globe. The demand has pushed down the interest rate on the 10-year United States Treasury bond to record lows around 1.5 percent. But investors have begun to worry about holding too many Treasury bonds as other safe alternatives dwindle as a result of the economic troubles sweeping the globe. This has led many investors to places that used to be on the fringes of the investing world like Norway, Sweden, Canada and Australia.

These countries offer little of the risk, or the outsize returns, that were so alluring to investors before the financial crisis. But now that fear is the main motivator — strategists call it seeking a return of equity instead of a return on equity — healthy government finances are a powerful magnet for money.

“It is getting harder to find safe assets,” said David Nagle, who helps manage money for insurance companies at Babson Capital. “We didn’t need to dig as deep a few years ago to uncover these things. But now you are scraping around for everything you can find.”

The search for investments that carry little to no risk of default has become a dominant theme driving flows of money around the world. It kicked in a few years ago when top-rated United States mortgage bonds blew up in the financial crisis, and it has intensified recently as the economic future of European countries that used to be viewed as safe investments has been thrown into question.

Foreign investors have fled from the bonds of countries like Italy and Spain, pushing up the cost of borrowing for those governments. Even those European countries with the strongest economies, like Germany, have become less attractive because of their exposure to the possible breakup of the euro currency.

Investors have instead sought out government bonds from Sweden, Finland and Norway, where rates have hit record lows this summer. Last week, while rates on Spain’s 10-year debt ranged from 6.5 to 7.5 percent, Norway’s hovered around 1.8 percent. In Norway, 70 percent of the outstanding government bonds are in foreign hands, up from 50 percent three years ago, according to Erica Blomgren, the chief strategist in Norway for the Swedish bank SEB.

The rush of money can pose serious problems. In Canada, the cheap money available to the nation’s banks has made it easier for people to get mortgages, pushing up home prices and raising concerns about a housing bubble. The Canadian government has responded by repeatedly tightening rules on mortgage lending, most recently in June, when the maximum term of mortgages was shortened to 25 years from 30.

Household debt in Norway has also risen recently, driving home prices to levels that some analysts have said are unsustainable. Unlike central banks elsewhere in Europe, which are pushing interest rates down to help encourage economic growth, Norway’s central bank cautioned in a June report that it will most likely begin increasing interest rates next year.

The influx of foreign money has also pushed up the value of currencies like the Norwegian krone, making exports less attractive and angering manufacturing companies. The central bank in Switzerland, another popular safe haven, has been aggressive in holding down the value of the franc by using its reserves to buy other currencies.

Clamor for safe assets is coming from investors of all stripes. Individuals and businesses in America have been depositing more of their cash in federally insured bank accounts. The banks, in turn, have had to find safe places to invest what they do not lend, and they have been competing against other money managers, like mutual funds and insurance companies, looking to do the same thing.

Money market mutual funds, which invest in safe, short-term debt, have an inside view on this search for safe assets because of regulations that restrict them to the highest-quality assets.

David Glocke, a portfolio manager for Vanguard’s money market funds, said that since the financial crisis he has had to cross a growing number of possible investments off his list because of the European crisis. While he used to provide very short term loans to banks across Europe, he has stopped lending to companies even in countries with the euro zone’s strongest economies, like Germany and the Netherlands.

“It’s a challenge to manage the portfolio in an environment where there are fewer names to invest in,” Mr. Glocke said.

Mr. Glocke has responded by putting over half of the money market funds’ money into short-term Treasury bonds, up from 28 percent in 2009. He has also added Australian and Canadian banks to the list of places where he will invest.

Money market fund managers around the world have found relative certainty in the government bonds of Germany, Japan and Britain, which all have interest rates on 10-year bonds that are near or below the rock-bottom United States yields. But many institutional investors have voiced concerns that the interest rates on these bonds have gone too low, particularly given the budgetary problems in the United States and Britain and Germany’s exposure to the euro.

The interest this has generated in smaller countries is evident from the short-term loans that have gone to companies like the Bank of Nova Scotia. The bank is Canada’s third-largest, but it recently overtook both JPMorgan Chase and Citibank to become the ninth-largest recipient of loans from money market funds, according to May figures from Crane Data. Canadian banks have been so attractive in part because of their good performance during the financial crisis.

“As long as global investors are worrying about the possibility of a renewed systemic banking crisis, it makes infinite sense that they would have a more positive feeling about financial systems that went through the 2008 crisis well,” said Craig Alexander, the chief economist at Toronto-Dominion Bank.

More broadly, American money market funds took $17 billion out of German banks and $19 billion out of the Netherlands in June, at the same time that the funds were putting $5 billion into Norwegian banks and $9 billion into Swedish ones, according to data from a J. P. Morgan analyst, Alex Roever.

Still, investments in Canada and Scandinavian countries are far from perfect replacements for Italian and Spanish bonds. The new safe havens are harder to trade into and out of during times of crisis because there are fewer outstanding bonds and less trading than in huge markets like that for United States Treasury bonds.

But the attraction of Norwegian bonds in uncertain times is not hard to understand. Norway’s unemployment rate hovers around 3 percent and the country is one of the few in the world with a budget surplus. If the government did ever run into trouble paying back bondholders, it could presumably tap some of the country’s immense oil resources. All of this has led investors buying insurance on government bonds to rate Norway as the safest bet in the world.

To give investors a way to buy into this safety, DNB has invented new kinds of Norwegian bonds for foreigners, including so-called covered bonds, which are backed by Norwegian mortgages. These were first made available in the United States in 2010, and $10 billion of them have already been sold. This year, the bank began placing its own bonds privately with American investors, raising $10 billion this way.

DNB’s New York offices are dotted with signs of construction as the company expands its offices to make room for the roughly 30 new employees it has brought on in the last few years to deal with the new activity — a 40 percent expansion. Kristian Ottosen, a bond trader, said that the company had been hiring from competitors forced by the risk-averse climate to scale back.

“We can actually afford to staff up when everyone else is struggling with the euro crisis and American mortgages,” Mr. Ottosen said.