I’ve posted a full blog response to your many excellent points.

Thanks again for your comment.

-rsh

I’ve posted a full blog response to your many excellent points.

Thanks again for your comment.

-rsh

I agree with many of your basic observation. Problem is, lenders make illogical decisions every day- like, say, lending $6.6 billion to a company with no real assets while it’s market was declining!

But bottom line, Realogy has little to no cash reserves, is running out of credit and their revenue isn’t covering interest payments AFTER making $350 million in operational cuts.

Sure it’s a profitable company without that debt hanging over their heads, and kudos to their managers for that, but that debt IS there and it isn’t going to just go away- so looking at revenue before the interest is quite frankly irrelevant. Spin it anyway you or Realogy wants, THEY ARE OPERATING IN THE RED.

To survive, they either have to make more cuts that don’t hurt revenue, increase revenue, find a lender to extend them more credit until the market gets better or get their lenders to restructure debt and/or wave interest payments.

After $350 million in operational cuts I question how they could make further cuts that wouldn’t impact revenue. The company’s customers aren’t people buying homes, rather it’s the agents and franchise brokers they service. At some point in time if services are cut too drastically, franchises will leave and agents, who are independent contractors, will find other brokers to work for.

With the market and economy as they are and all the negative media starting to swell around their company I doubt they can drastically increase revenue. That would mean recruiting successful agents away from other companies at a time when ever competitor is waving that US News report in front of the agents they already do have.

Moody’s has pretty much guaranteed they won’t find someone willing to extend them more credit- unless it’s Apollo who hasn’t made a practice of doing it. And thanks to Carl Icahn, the easy restructuring is now off the table.

That means Realogy’s survival basically hangs on the charity of lenders who, at some point in time in the near future, will more than likely have to wave interest payments in order to allow the company to make payroll. Problem is, Carl Icahn, their largest lender, isn’t exactly known for his charity and other lenders have their back so far against the wall right now that you can’t be sure they will always do the logical thing.

More important, if you’re a lender in this situation, it’s pretty hard to forfeit the interest you are owed when equity holder Apollo has mighty deep pockets.

I agree with many of your basic observation. Problem is, lenders make illogical decisions every day- like, say, lending $6.6 billion to a company with no real assets while it’s market was declining!

But bottom line, Realogy has little to no cash reserves, is running out of credit and their revenue isn’t covering interest payments AFTER making $350 million in operational cuts.

Sure it’s a profitable company without that debt hanging over their heads, and kudos to their managers for that, but that debt IS there and it isn’t going to just go away- so looking at revenue before the interest is quite frankly irrelevant. Spin it anyway you or Realogy wants, THEY ARE OPERATING IN THE RED.

To survive, they either have to make more cuts that don’t hurt revenue, increase revenue, find a lender to extend them more credit until the market gets better or get their lenders to restructure debt and/or wave interest payments.

After $350 million in operational cuts I question how they could make further cuts that wouldn’t impact revenue. The company’s customers aren’t people buying homes, rather it’s the agents and franchise brokers they service. At some point in time if services are cut too drastically, franchises will leave and agents, who are independent contractors, will find other brokers to work for.

With the market and economy as they are and all the negative media starting to swell around their company I doubt they can drastically increase revenue. That would mean recruiting successful agents away from other companies at a time when ever competitor is waving that US News report in front of the agents they already do have.

Moody’s has pretty much guaranteed they won’t find someone willing to extend them more credit- unless it’s Apollo who hasn’t made a practice of doing it. And thanks to Carl Icahn, the easy restructuring is now off the table.

That means Realogy’s survival basically hangs on the charity of lenders who, at some point in time in the near future, will more than likely have to wave interest payments in order to allow the company to make payroll. Problem is, Carl Icahn, their largest lender, isn’t exactly known for his charity and other lenders have their back so far against the wall right now that you can’t be sure they will always do the logical thing.

More important, if you’re a lender in this situation, it’s pretty hard to forfeit the interest you are owed when equity holder Apollo has mighty deep pockets.

Thank you for your comments. We are all in this together, and if all of that energy was spent helping one another instead of speculating the worst, we would all be in a better place.

Thank you for your comments. We are all in this together, and if all of that energy was spent helping one another instead of speculating the worst, we would all be in a better place.

As I responded on that US News thread, some of the naysayers are… I don’t know…

Q3 results for Realogy shows that they had a Net Loss of $50M. But that was after interest expense of $152M. Isn’t that debt service?

If I’m a bondholder, and my bonds aren’t due until 2013, but I’m getting interest payments during the worst housing downturn in a few generations… why am I unhappy?

I just don’t get it.

And some of the other commenters are just bonkers.

-rsh

As I responded on that US News thread, some of the naysayers are… I don’t know…

Q3 results for Realogy shows that they had a Net Loss of $50M. But that was after interest expense of $152M. Isn’t that debt service?

If I’m a bondholder, and my bonds aren’t due until 2013, but I’m getting interest payments during the worst housing downturn in a few generations… why am I unhappy?

I just don’t get it.

And some of the other commenters are just bonkers.

-rsh

For what it’s worth, Realogy did issue a post to Mr. Newman who posted its contents on his blog: http://www.usnews.com/blogs/flowchart/2009/02/10/reaolgy-insists-it-will-survive-2009.html.

Again, thanks for your insight.