Another positive report showing first half 09 sales and financial status of the TOC. Interesting statement at the end. "If every buyer defaulted at closing and there was no cash remaining in any of the escrow accounts, the company would be able to sell each unit at an average 58% discount of current prices to generate $220 million, the amount outstanding on the bonds"
From JP Morgan: Trump Ocean Club: Total Return Proposition Still Attractive
* We maintain our overweight recommendation on the TOCLUB 9.5% '14s (B1/NR/B+) based on the company's demonstrated ability to weather the sharp global real estate decline and relative attractiveness of the bonds. The Notes are currently offered at 85 for a YTM of 15.1% and YTC of 30% or 19.4%, assuming the bonds are called in November 2010 or 2011.
* Sales totaled US$17.6 million in 1H09, an average of US$2.9 million per month, helping the company maintain its collateralization ratio, albeit tight, in line with the minimum 1.25x level, by generating enough receivables to offset the decline in receivables from collections. Management expects sales of approximately US$11 million during the August-November period. As a result, we expect 2009 sales to reach approximately US$33 million.
* Collections totaled US$20.4 million in 1H09, mostly resulting from the payment of the final bulk deposits due in May, but also from 2009 sales and the company's accelerated payment discount program. Collections allowed the company to quickly replenish its Debt Service Reserve Account (DSRA) after its May coupon payment and fund working capital needs. Management does not expect to have any issues refilling its DSRA account after its November 15 coupon payment, which is already pre-funded.
* The company's liquidity position remains strong with US$123.9 million in cash as of 2Q09, US$123.8 million of which is restricted, mostly in the Construction Escrow Account.
* The construction of the building, which has been fully financed with the 2014 Notes, is expected to be completed by August 2010 with delivery of certain units expected beforehand, allowing the company to collect final payments before final completion.
* If every buyer defaulted at closing and there was no cash remaining in any of the escrow accounts, the company would be able to sell each unit at an average 58% discount of current prices to generate $220 million, the amount outstanding on the bonds.
Click here <https://mm.jpmorgan.com/stp/t/c.do?i=898A3-58&u=a_p*d_327926.pdf*h_3v424jbk> for the full Report and disclaimers.
Jacob Steinfeld <http://www.morganmarkets.com/analyst/F090486>
(1-212) 834-4066
jacob.a.steinfeld@jpmorgan.com
