RE I have a security traded Novation Companies, Inc. Traded OTCBB: $NOVC formerly NYSE: $NFI
They are incorporated in State of MD
1200 Employees Per 10K & 696 Shareholders of Record not including those insider street names.
NOVC owns one operating sub www.healthcare-staffing.com est $55M Revenue, $730M NOLs and Rights that control collateral assets to most $3 Billion RMBS portfolio with WAC of 600 Bpts.
This memo suggests they will duplicate past restructurings by splitting $NOVC into 2 tax free public co (see NRZ/DS below) one tax exempt MREIT paying dividend another HCS www.healthcare-staffing.com HCS with high moat operating tax free $730M NOLs.
NOVC formally exit Ch 11 April 19, 2019.
Pricing of $NOVC Common is in my opinion caused by the controlling Board of Directors own 40M with co investors which have colluded with Note Holders who also own 31.3M 27% of NOVC common. They have invested together and restructured similar companies to NOVC especially Dynex Capital NYSE $DX.
NOVC Board & their co investors own at least 90M of 116M share outstanding including 40M 35% common shares for themselves. GAAP hide this fact. Further they conceal their future plans for collateral assets creating a "Going Concern" under GAAP thereby suppressing share price. I believe their motivation is to allocate 50M shares at pennies to themselves (31.3M for their co investors Note Holders at less than ONE PENNY and 18M RSUs for themselves the Board of Directors).
I believe Mass Mutual and Barings aka Babson Capital own 19.3M subsidiary has provided tacit consent (understanding that these same investors and their powerful parents Softbank $SFTBY + White Mountains $WTM will participate in a real restructuring).
I have a short list of shareholders that hold est. 30M of 116M shares outstanding per 10K 2020 filed 3/4/21
NOVC holds Cleanup Call Rights (CCR) per SRTA Sec 5.04 (attached to back of NOVC Q3 2007). These rights allow only NOVC their subsidiary Novastar Financial Inc (formerly traded NYSE symbol $NFI) to control most of the $3B RMBS Portfolio collateral assets. THE CCR or RIGHT’s CURRENT VALUE IS MEANINGLESS/MISLEADING IT IS THE FUTURE PLANS OF THESE MREIT experts; Barry Igdaloff, WESLEY EDENS AND PETER BRIGER of Fortress/CDOs Taberna I and II, Manny Friedman, CEO of EJF Capital owned by White Mountains via sub Kudu Inv Mgt/Kodiak CDO One, as well as Mass Mutual Barings who in total own at least 90.6M NOVC common shares or 78% of all issued and outstanding common shares in 2020 10K 116M. Most taken at pennies or less 50M (18M RSU for Board and 31.3M for Note Holders Fortress/EJF).
The VALUE OF CCR IS NOT APPLICABLE to any discussion or analysis. The value of these rights is misleading (see page 25 of $NOVC 10K 2020) it is what these investors plan on doing with the control over these collateral assets that is important. For this we need go no further than to study and review a dozen past restructurings by those that control NOVC Capital Table:
Dynex Capital NYSE $DX that is NYSE MREIT that buys Mortgage Loans slices and dices the cash flow and issues AND INVESTS TO ACHIEVE NET INTEREST MARGIN NIM & TAXABLE INCOME in ABB Asset Back Bonds or MBS Mortgage-Backed Securities Portfolio. $DX operates like the way Novastar Financial Inc NFI sub of NOVC use to operate ex NYSE $NFI and the way New Residential Investment Corp www.newresi.com $NRZ operates at 15:1 leverage, which means for one dollar of capital they borrow 15 times of liabilities at a Cost (the 10 Yr T Bill - today 10 yr Bill rate is estimated at 112 Bpts). The difference is the NIM Net Interest Margins (think Gross Margins) less some SGA and Other Expenses equals taxable income. IRS requires 90% x TI to be paid in dividends to remain tax exempt. If NOVC Novastar Financial Inc. $3B RMBS portfolio has Weight Average Coupon WAC is 600 Bpts study Bond Remittance Reports at www.novationcompanies.com and cost of capital is Fed Funds Rate 0% or 10 yr T Bill this creates NOVC aka NFI NIM Net Interest Margin of 600-0% or … NIM 600 Bpts say 500 Bpts NIM (think Gross Margins) for $NOVC shareholders managing a risk adjusted portfolio like Dynex Capital $DX pays .13 monthly dividend. To illustrate if NOVC has $3B collateral assets x 15 times leverage that is $45B portfolio x NIM 500 Bpts = $2.3B $2,300,000,000 NIM est $5.50/annual dividend (this is an illustration, reality is based on many variables). Say NOVC splits into 2 tax free companies; Tax Exempt MREIT that pays a dividend like $DX .13 monthly dividend. NOVC shareholders for 40K today can buy 1M common shares that would collect $130,000 MONTHLY in dividends. You still own 2nd tax free company HCS www.healthcare-staffing.com or Newcos with $730M NOLs.
NOVC largest Note Holder hidden behind CDOs Taberna I and II is Fortress. Fortress restructured 2013-2016 Newcastle Investment Corp old symbol $NCT now called Drive Shack $DS. Wesley Edens COB of www.DriveShack.com $DS shareholder Dec 2016 presentation see attached. Slides 4-5 provide an overview how Fortress/Wesley Edens spun off 3 MREITS from Newcastle before changing the name to Drive Shack. Listen to Wesley Edens' shareholder call: he spoke proudly how important $NCT NOLs $160M would be to Drive Shack’s future (see slide 11 of Edens' Presentation to $DS Shareholders. Fortress holds $730M NOLs). Fortress Wesley Edens is CoB of both Fortress and Drive Shack $DS. Edens was COB of Capstead Mgt $CMO when he and NOVC Chairman restructured $DX which CMO held 2000-03, Nationstar Fortress sold to Mr. Cooper $COOP for $3.8B. $COOP was Washington Mutual WAMU, WMIH 17% owned after Nationstar Acquisition by KKR. Mr. Edens has restructured many companies with the same attributes to Novation Companies, Inc. OTCBB $NOVC, so why are they playing dead at NOVC? It must be to take more than just 50M shares at less than ONE PENNY & BUY in open market over 100M of NOVC common at pennies off inside information their true narrative. Fortress aka Edens changed Newcastle name to Drive Shack symbol from $NCT to $DS but only after spinning off 3 tax-free MREITs:
$NRZ New Residential Corp www.newresi.com NRZ 2020 10K shows Fortress reaped or collect $170M cash (2-part management fees) from NRZ shareholders for One Year alone 2019. Fortress also reaped tens of millions in $NRZ $2.00/share annual dividend 2019 alone.
$SNR New Senior Corp which was sold days ago for $2.3B. SNR sued Fortress to stop them from reaping another NRZ management fee.
$GCI New Media
NOVC Note Holders are FIRST AND FOREMOST NOVC Common Shareholders (there is no future in the Debt, FMV in 2020 NOVC 10k is a paltry $11m & Fortress and EJF have no cash invested in CDOs, which brings an "arm’s length negotiation" between NOVC Board and CDOs (Taberna I and II and Kodiak CDO One into question).
NOVC Sr Debt is a Ruse it is fraud. The Sr Debt is owned by Fortress and EJF hidden behind CDOs Taberna I & II and Kodiak CDO. By Concealing this FACT NOVC forces Boulay Group Top 100 CPA firm to create a “Going Concern”. Going Concern is a GAAP term to indicate; If an investor invests in NOVC they could within 12 months loose it all because of the Debt. The DEBT is a fraud. So who is buying over 100M NOVC Common just since Ch 11 exit? How are they locating shares when investors already own more shares then are outstanding dilute?
Most investors hold debt hoping the organization will be successful and they can either convert at a low share price or the organization will repay the debt + ROI, if they lose they have some liquidation preferences”. NOVC Sr Debt may have face value of $87M but the Debt has ROI of 3-month libor + .350 Bpts. Given NOVC SEC filings my thesis suggests common shareholders will announce a restructuring including retiring Sr Debt and Debt Holders Fortress and EJF Capital will participate with Mass Mutual and Barings plus their parent Softbank and White Mountains in NOVC PS Series F shelf offering (see Oct 2018 Proxy 14A page 12).
Boulay via GAAS Generally Accepted Auditing Stds knows NOVC Sr Debt Holders are also the largest NOVC largest Common Shareholders & have been for years since Aug 19 2019 https://www.globenewswire.com/news-release/2019/08/09/1900133/0/en/novation-companies-inc-executes-first-amendment-to-senior-secured-note-purchase-agreement.html but they know these investors are FIRST AND FOREMOST NOVC Common Shareholders. This means they have certified NOVC 2020 10K BREACHING their duty under GAAP and AICPA Code of Ethics. Boulay Group risks their CPA license to practice and make a living. Extract from this link:
Under the amendment, Novation will issue to holders of the senior notes a total of 9 million shares of common stock, as well as 10-year warrants to purchase a total of 22.3 million shares of common stock at an exercise price of $0.01 per share.
Additionally, Novation agreed under the amendment to direct 50% of each year’s excess cash flow (beginning with the fiscal year ending December 31, 2019) toward principal reduction on the outstanding debt balance under the senior notes.
The Company had $85.9 million of unpaid principal amount outstanding under the senior notes as of June 30, 2019.
Lastly, under the amendment, the financial covenants under the purchase agreement will not apply until the period ending December 31, 2021.
There is no doubt who controls Novation Companies Inc. $NOVC it is Note Holders own 31.3M common shares and NOVC Board owns at least 40M shares backed by MassMutual Barings 19.3M. Note Holders have been paid $11M cash by NOVC (NOVC a $3M market cap) just since Ch 11 and at same time 31.3M common share in and post Ch 11 for NO CRAM DOWN (Bankruptcy term that states Common Shareholders aka the “Debtor” gives Creditors/Sr Debt Holders CDOs owned by Fortress/EJF Capital something cash and common) and should get reduction of principle in return. NOVC famed Ch 11 Attorney Joel Sher of Shapiro Sher and Judge Davis know this fact).
Did Barry Igdaloff Chairman of NOVC and his cabal give Wesley Edens/Fortress payback for helping them make billions at Dynex Capital $DX via Fortress 100% ownership of Capstead Mortgage $CMO 2000-03?
Ask yourself why Barry Igdaloff and his cabal would accumulate at least 40M NOVC Common Shares of which almost half was given themselves by themselves in 18M RSUs? 18M RSUs taken by NOVC Board at pennies per share price, a shareholder price they engineered?
Was the $11M interest paid Note Holders PLUS 31.3M common shares at less then ONE PENNY, Gross Negligence/Incompetency by NOVC Board? Igdaloff restructured DX with Note Holder Fortress/Taberna CDOs and is JD, CPA.
Was it their “quid pro quo”/understanding that Fortress, & their Parent Masa Son, CEO of Softbank $SFTBY will join Mass Mutual their subsidiary Barings and EJF Capital and their parent White Mountains $WTM by participating/investing in NOVC PS Series F (shelf offering detailed in NOVC Oct 2018 Proxy 14A filing – prices one NOVC common at $2.33/share)?
Fortress restructured very successfully Dynex Capital $DX with Barry Igdaloff, Howard Amster (both sit on NOVC Board and common & together own 13% of common), Igdaloff good friends Todd Emoff his brother and Thomas Akin ex Chairman of DX Board and largest shareholder in IMH another Fortress investment own at least 10M NOVC common (max allowed by NOVC poison pill reviewed in Oct 2018 14A and again recently). Barry Igdaloff and his college friend Todd Emoff both separately stated how Fortress COB/CEO/owner of Milwaukee Bucks Mr. Wesley Edens flew to Columbus OH and discussed a plan for turning around Dynex Capital $DX (including the ouster of then Thomas Potts as CEO) from pennies to $10 per share (pre 3:1 reverse split so DX could join NYSE). $DX is where NOVC Founders worked before $NFI aka $NOVC Lance Anderson ex CEO of NOVC but also the Mechanic Producing Mortgage Assets & Scott Hartman Quant with Mike Bamburg who securitize the collateral assets into Bonds ABB, MBS. NOVC aka $NFI invested in these bonds and sold over half to GSEs. The residuals carried on NOVC Balance Sheet was petty cash compared to the future control of collateral assets CCR which trigger when the current bonds balance hits 10% triggers. Quants like Michael Huang at Fortress and Bamburg and Hartman understand the CCR they call second bite of apple are "Standard Operating Practice for MREITs".
Fortress sold all of DX via selling 100% of Capstead Mortgage when $DX hit $10/share (pre 3:1 Reverse split which means DX price today $18/3 = $6 compared to $10 per DX share when Fortress sold all of $CMO Capstead Mgt).
Fortress has a habit of camouflaged their trading strategies like CDOs Taberna I and II (largest owners of NOVC only debt and most 31.3M shares given Note Holders). Fortress’ manipulating of $DX with Igdaloff via Capstead Mortgage $CMO is no exception. Barry Igdaloff went into detail such as stating Fortress accomplished this by camouflaging their $DX position via Fortress 100% ownership of $CMO Capstead Mortgage. Wes Edens 2000-03 was also COB of both CMO and Fortress.
If you take nothing away from this note, please understand 3 points
1. NOVC Sr Debt owned by Common Shareholders is a ruse, fraud to drive NOVC share price to a pennies so as to give themselves 50M of their 90M position at pennies and BUY in the open market X number of shares off inside information/TRUE PLANS. Gillman and Eberwein (by extension their 3 appointees to NOVC Board David Pointer, Lee Keddie and Tim Eriksen) were fined by SEC for this same behavior https://www.sec.gov/litigation/admin/2017/34-80038.pdf
2. It is NOT THE VALUE (FMV or other) of CCR cleanup call rights per Service Rights Transfer Agreement Section 5.04 that matter but the future plans to monetize rich, seasoned collateral assets as noted above.
3. $730M NOLs will not be wasted but keep in mind $250M are not NOLs but Unrealized Tax Capital Losses UTCL. NOLs offset taxable income but the $250M UTCL only offset capital gains. They know this and by misrepresenting this tax issue under IRC in SEC filings, they again suppress the share price. Bill Wallis agreed the UTCL are far more important than the actual NOLs. Wallis knows why? So does NOVC entire Board of Directors, Barry Igdaloff, Chairman of NOVC, Note Holders and Common Shareholders Wesley R. Edens, Manny Freidman, and Mass Mutual Barings.
Fortress and EJF own 31.3M + MM Barings own 19.3M and Igdaloff and Gillman cabal own at least 40M of NOVC common (half held by Igdaloff, Rose Cap his HF and Chuck Gillman, Jeff Eberwein and by extension their board appointees Pointer, Keddie and Eriksen) total 90.6M NOVC Common. Add in my position plus a small shareholder count we own at least 29.7M say 30M totals 120.3M shares owned and not traded. Plus, per NOVC 2020 10K there are 696 shareholders of record not including those inside street names. If 120M shares are held and there are only 116M share issued and outstanding per NOVC 2020 10K where have the 100M NOVC common shares come from just since Ch 11 exit 4/19/19?
THIS IS FOR ENTERTAINMENT PURPOSES DO YOU OWN DUE DILIGENCE AND SHARE.