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The big open secret here is that AGNC, like other mortgage REITs , makes liberal use of leverage in an effort to enhance shareholder returns. For starters, pledging basically means the company is using its mortgage bond portfolio as collateral for loans. In and of itself using leverage isn't a bad thing, but it increases risk.
In the past, Dickson held numerous markets and banking leadership positions including running corporate and investment banking, equity and debt capital markets, leveraged finance, structured finance and securitization businesses. Tyler Dickson added: “I’ve admired Blackstone’s innovation since leading the firm’s IPO in 2007.
We are actively gathering year-end financial information for our entire portfolio, and with most of the data already collected, the weighted average debt service coverage ratio remains over two times, with most of the collaterals in our portfolio generating more than twice their annual debt service payments. Those are two examples.
So, until the financial crisis of 2007 and 2009 or however you go — you actually time it, I was in this finance bubble. And so, therefore, the usual market forces that push against high leverage in other companies that just naturally with no regulation would limit. Any kind, collateral, non-collateral. ADMATI: OK.
You’ve probably heard some aspects of this from the various interviews I’ve done with Howard Marks talking about the distressed asset fund they set up in 2007. You joined in 2007. But, but fast forward to June of 2007, you know, oaktree in the distressed debt landscape is, is really, you know, second to none.
MILLER: The collateral won’t be adequate in our view. And they found on average, when you have a crisis that originates in the finance sector due to too much leverage, too much speculation, on average markets get cut in half and real estate loses about 30% of its value. Or could, would, or wouldn’t be. ” MILLER: Yeah.
And there was one conversation very early in my career, this was actually 2007, where I was interviewing with an asset manager and I pre-meeting, asked them what they thought of the market. This is implicitly leverage. Leverage is a tool that accentuates both the good and the bad. 00:28:05 [Speaker Changed] Exactly.
And you had the great insight and business acumen to tap out of Bear Stearns in 2007 with all of those options that you had and exercise the options, sell them and launch your shortness, the asset management. 01:18:12 [Speaker Changed] Understand the leverage that you get from all of the new AI tools. Totally agree.
MORGENSON: It can be collateralized loan obligations, now it’s big private debt. In 2007, firms extracted — the private equity firms extracted $20 billion from companies in the form of dividend recapitalizations. But so you had these dividend recaps. So, let’s talk about a little bit of pushback.
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