June 15, 2020

June Exantas Capital Corp Earnings Conference Call

This month’s Exantas Capital Corp. Earnings Conference Call began with opening remarks from Andrew Farkas, Chairman of the Board. As disclosed in the most recent Exantas Capital Corp. earnings release, the company sold their entire CMBS portfolio, other than the B-Piece investment they held unlevered, which resulted in a $180.3 million loss on sale. Farkas is confident that the team will find themselves prepared for whatever opportunities they may be presented with once the markets begin to normalize. Farkas ensures, “The objective… is the company emerges strong and solid as we go forward into the market and make certain that we have a future for all of our shareholders and for the organization.” 

While Exantas certainly felt comfortable with the CMBS portfolio they had acquired, the lack of liquidity in the CMBS market during that time led to pricing that was not reflective of underlying value and led to margin calls inconsistent with the fair value of their assets. The size of the CMBS portfolio and retained investment-grade CLO notes prior to the disposition was $548.8 million at cost, yielding a net investment of $112.8 million before any margin calls and other deposits. As of April 21, Exantas terminated all of their interest rate swaps associated with their disposed CMBS portfolio and realized an $11.8 million charge to equity as a result of the swap terminations, of which $11.3 million was recognized on March 31. 

Farkas ends with remarks about the unprecedented manner in which the economic crisis occurred, and how profoundly it has affected the company. As stated in both the beginning and end of the call, the aggregation of liquidity and strength of the company continue to be at the forefront of the management team’s current priorities.