NOVC Shareholders know exactly who NOVC Board is talking to per last 10Q which states NOVC a going concern (less than one month from officially leaving Ch 11 4/19/19) yet in talks with Sr Debt Holders aka Fortress the investor that controls 68% of NOVC Sr Debt via CDO Service Rights on Taberna I & II.
What NOVC Shareholders may not know but it is right in front of them is COB of Fortress, Wesley Edens & Head of Fortress Credit Peter Briger are experts in NOVC Call Rights (right to call back collateral assets on most of $3B portfolio aka very profitable and seasoned Non-QM aka Subprime mortgage loans (Collateral Assets) that can be resecuritized at NIMs est 400-500 Bpts),
Fortress made a fortune reorganizing Dynex Capital DX with DX investors that own 33% of NOVC common maxed per poison pill. DX also had a large NOL and many of the same attributes to NOVC. NOVC Founders came from DX. Fortress' track record proves they are experts in how to monetize NOVC $730M NOL and NovaStar Financial Inc. NFI brand Non-QM aka Subprime Mortgage brand that produced $40B subprime mortgage loans.
So why is NOVC Board making things look like they and Fortress have no clue?
NFI is very similar to other Subprime lenders Fortress has cashed recently and reorganized including NationStar NSM Fortress recently sold to COOP Mr. Cooper 17% owned by KKR. NationStar NSM sold for $3.8B which Fortress owned 68%. Mr. Cooper holds $7B NOL and is ex WAMU. One Main OMF Fortress sold their 40% of common to Apollo read below.
Fortress reorganized Dynex Capital via Capstead Mortgage CMO 2000-2003. DX had $180M Deferred Tax Asset including $125m NOL.
Fortress reorganize Newcastle Investment Group NCT splitting it into Drive Shack DS & New Residential Investment Group NRZ, DS kept all NOLs from NCT. Wes Edens spoke positively about how important NCT’s NOLs are to DS future. NRZ a MREIT thus tax exempt under REIT IRC regs. Just like NOVC use to operate as MREIT tax exempt under NovaStar Financial Inc. NFI brand.
Fortress also liquidated 40% ownership in OMF One Main (Springleaf Financial Services which traded as LEAF ex AIG Subprime lender that merged with and adopted One Main OMF from Citibank) for $1.4B (selling to Apollo Global Mgt). Fortress use to own 25% of IMH Impac Mortgage Holdings which securitized two deals in 2018 both 100% collateralized by Non-QM aka subprime Mortgage loans both deals garnered AAA Ratings S&P. IMH biggest shareholder is also one of the biggest shareholders in NOVC Thomas Akin & his HF Talkot Capital, (Akin is on the Board of IMH & Akin is ex COB of DX & sat on DX Board with NOVC lead board member Barry Igdaloff.
Shareholders of NOVC appreciate 4 investors connected with Dynex Capital own at least 25% of NOVC common. These 4 came from Dynex Capital DX (DX Board Members present or ex and investors) the organization that NOVC Founders Lance Anderson and Scott Hartman worked at prior to founding NOVC. Barry Igdaloff 9.3M, Howard Amster 4.5M, Thomas Akin and Barry college friend per his book Quest in Nightmare Todd Emoff.
1. Howard Amster and affiliated entities owned over 5% of both DX common and preferred per SEC Reports,
2. Barry Igdaloff is Board Member of DX and NOVC per 14A Proxy owns 9.3M 10% est of NOVC common.
3. Thomas Akin/his HF Talkot Capital is ex COB of DX est 4.5-5M NOVC common shares Talkot per NOVC Ch 11 doc stated holding of 2.58M NOVC common est 5%.
4. Todd Emoff/Freedom Asset Mgt 5% (Emoff is College Buddy of Igdaloff and referenced in Igdaloff own book “A Guest in A Nightmare” he told me Jan 2014 that he wished NOVC would stay priced low so he and his brother could buy more shares. He also told me how Wesley Edens helped them and others outs Thomas Potts ex DX Shareholder. Thomas Akin took over for Mr. Potts.
What NOVC Shareholders do not appreciate is Chuck Gillman and Jeff Eberwein were introduced to Barry Igdaloff Nov 2014 and by April 2015 NOVC Board had removed Edward Mehrer from NOVC Board and eventually later that year removed Lance Anderson ex CEO Oct 2015 and Gregory Barmore Dec 31, 2015. Art Burtscher NOVC Board Member was removed right before Ch 11 6/9/16 leaving Chuck Gillman, Jeff Eberwein and a designate of theirs plus Barry Igdaloff and Howard Amster the remaining 5 NOVC Board members. Eberwein became NOVC Chairman of the Board and CEO temporarily to usher in Ch 11. There is no doubt todays 3 new Board members are very close to Gillman and Eberwein and thus 3.7M RSU awarded them in 2019 are just related equity. Per Form 4s in 2015 Jeff Eberwein HF Lone Star Value Mgt bought est 3.2M NOVC common at price est.29 cts (Eberwein or his HF BOUGHT est 25K shares every day from April to Oct 2015 see Form 4s). In total Chuck Gillman, Jeff Eberwein and related parties own at least 8.5M common almost as many as Barry Igdaloff and his HF Rose Capital Mgt est 9.3M per 10K last filed.
NOVC Board and Ch 11 process should have done a cram down with Sr Debt instead Sr Debt aka Fortress received a windfall in Ch 11. Shareholders have waited over 4 years for Barry Igdaloff new board and have received no transparency and have seen Mr. Igdaloff ditch NOVC shares. It is time NOVC Shareholders hold Mr. Barry Igdaloff and his control grouped accountable.
Given the relationships of these investors (Barry Igdaloff, Howard Amster, Todd Emoff, Thomas Akin and their new friends Chuck Gillman, Jeff Eberwein and two big brothers Mass Mutual Barings and Fortress) that control NOVC Board of Directors and Capital Table and their expertise in NOVC Call Rights ability to call back collateral assets that are very bullish (listen to related entities IMH and NRZ) in their $3B portfolio of Non-QM aka Subprime Mortgage Loans, NOVC Shareholder should be asking what is going on. NOVC Board appears to have submerged http://www.healthcare-staffing.com/ HCS web site which has been down for many weeks. HCS which has expanded from GA to NC.
NOVC Board not only failed to restore NOVC to sound financial footing in CH 11 (Joel Sher of Shapiro Sher in press release on NOVC CH 11 lawyer takes credit for this accomplish when M&A Advisor named Novation Companies the 2017 Small Cal Turn Around of Year and gave Sher a black tie award) but now submerges HCS website while they expand. NOVC shareholders should expect these investors to behave in their economic best interest yet the opposite has happened. Why? If NOVC sees another 14A filed with these investors awarding themselves not 833,333 RSU per 10/4/18 Proxy ($25K Board pay valued at 3 cts) but 1.67M RSU (25,000/.015) NOVC Shareholders will know who’s interest is being forwarded.
The only way for NOVC to monetize $730M NOL and Unrealized Tax Capital Losses is to replicate Fortress’ reorganization of Newcastle Investment Group NCT noted above. Given the expertise and relationships above NOVC shareholders should expect
1. NOVC to issue PS Series F defined on pages 11 to 15 of last Proxy 14A which is a private placement hidden in poison pill or 500M Common Equivalents priced at $2.33 per common share or right to 1 common dividend and 1 common vote (control). $2.33 per common right is exactly Mass Mutual cost basis. I expect Fortress and Mass Mutual to take lead on PS Series F - No two investors have more dry powder, more expertise and more interest.
2. Eliminate or retire NOVC Sr Debt which Fortress controls.
3. Like NCT which Fortress split into DS and NRZ - NOVC would split NOVC into MREIT by spinning NFI out like NRZ, using Call Rights to drive a new dividend.
4. NOVC Novation Companies, Inc. would keep NOLs and UTCL like Drive Shack DS.
5. NOVC shareholders would have two public priced organizations just like Fortress did at Newcastle Investment Group which has DS at est 4 pps and NRZ at 17 PPS. Thanks to NOVC Board or the lack of their performance eover last 4+ years, Mr. Market can buy NOVC today for 2 cts a common right to vote, collect dividends just like Fortress does at NRZ.
Shareholders should ask NOVC Board and CEO what they are up to and why they would not do the above. They should demand the Board level the playing field and issue a Statement of Strategy to Shareholders post Ch 11. If shareholders see another 14A and NOVC Board is awarded not 833k RSU (Oct 2018) but 1.67m or even 2.5M everyone will know exactly what Barry Igdaloff and his band is up to.
A Guest in a Nightmare Kindle Edition
by Barry Igdaloff (Author)
Why is ISBN important?
From Wikipedia, the free encyclopedia https://en.wikipedia.org/wiki/Wes_Edens