Terra Firma Capital Corp. V.TII

A few things to consider

[Trelawny]

Moogul,
One thing I would like to point out is that the drop in Yield of YoY not QoQ.

Also, I think you are missing a key component to the yield. There are two numbers that come in play for TII's total yield: Top line  yield which you referred can be thought of as the Revenue Line – the second line which you haven’t looked at is the Syndication Line (think of this as the cost line).

In the MD&A on page 4 you see the drop from 19.6% to 15.8% - what you didn’t contemplate is that the costs line moved from 11.9% to 10.5%(page 14). Going back to the previous MD&A In the one quarter the costs from Q3 to Q4 dropped from 13.4% to 10.5%.

Further, some of the top line differences in yield are due to differences that come with how the US loans are recognized on the books. Also, there is a timing issue with when the loans are syndicated.

Additionally, as the loans in the U.S are syndicated remember that they are 1^st mortgages – this will further drive down the syndication costs and increase the spread that TII enjoys.
So the revenues – as a function of spread will increase, because the US loans are higher yielding and will have higher spreads due to the lower syndication costs -therefore total revenue will be higher from the US loan book than their Canadian loan book.
Also, key drivers going forward is that the US deals are much larger and any one deal will materially increase both the loan book and the yield of the overall book.
From a valuation point of view – this company still trades at or below book value and will eventually begin to trade on P/E.
Hope this helps in some way.
 
Best regards,
 


Colin Fisher, President and Portfolio Manager, StableView Asset Management