This REIT's Common Dividend Is Garbage, Preferred At Risk

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The common dividend is garbage. Even at $.05 per share, it is not remotely sustainable. The two most likely scenarios for RAIT Financial (RAS) are extreme dilution or eventual bankruptcy. The company can avoid entering into those scenarios for quite a while by suspending the preferred dividend. I believe this should have already been done.
So, what else do you need to know?
Here is where I would start:
Common book value per share already is negative. This assumes valuing preferred shares at a negative $25. The baby bonds might be interesting, but the information in the prospectus is dated. The terms of the bond were changed after issuance. RAS is planning to change the focus of their business and is in the middle of a transition, which will be more heavily addressed toward the end of the article. Let’s get into the analysis.
This article will heavily rely on information gathered from the 10-Q.
RAS has four series of preferred shares and two baby bonds. One of the series of preferred shares isn’t trading, that is RAS-D, and it is the one where management spent a substantial amount of money buying it back at full value over the last year.
Regardless of what management expected for share prices, it was time to be conserving capital, not buying back preferred shares at par value. That capital would be very useful now,... Read more

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