MuniMae suspends quarterly dividend

Firm is still dealing with credit crunch

By Hanah Cho | Sun reporter

May 6, 2008

Municipal Mortgage & Equity LLC, the real estate and alternative energy project financier, said yesterday that it is suspending its quarterly dividend as it continues to deal with the fallout from the slumping credit market.

The Baltimore company, better known as MuniMae, had reduced its quarterly dividend to 33 cents in January, marking its first cut in 43 consecutive quarters. Since that time, its stock, which was delisted by the New York Stock Exchange, has plunged 77 percent.

Last month, the company said lenders and investors who take positions in the funds it manages are pulling back from the business as they deal with credit problems. As a result, MuniMae said it is launching fewer funds, doing fewer deals and conserving cash until the market recovers. At the time, the company hinted that such actions could result in reduced dividends, revenue and earnings.

The company said yesterday that it will review its payout each quarter.

"The question is do you spend what would be for us $13 million or do you conserve it? We decided to conserve it to ensure we have the capital we need to weather the storm," said Michael L. Falcone, MuniMae's chief executive officer. "The problem is, in this kind of environment, you never quite know if you have enough. That's why we thought that suspending the dividend was the prudent thing to do."

Although it does not have subprime mortgages in its portfolio, MuniMae was indirectly affected by the meltdown in that market.

MuniMae arranges financing for real estate and renewable energy projects and relies heavily on the credit markets. Credit problems in recent months have caused banks and investors to stop putting money into MuniMae's funds, which are used to finance housing projects. It also buys and sells tax credits from affordable-housing projects.

Although MuniMae is curtailing parts of its business, loans that it originates and sells to Fannie Mae and Freddie Mac have increased, the company said. Moreover, investments in renewable energy projects continue, MuniMae said.

The company disclosed last month in regulatory filings that it is close to finishing a more-than-yearlong effort to restate earnings for 2005 and report previously undisclosed earnings for 2006 to comply with accounting standards.

The New York Stock Exchange delisted MuniMae's shares this year because of delays in resolving the accounting problems. The company hasn't filed a financial statement since August 2006.

The company said yesterday that it completed an audit of its MuniMae TE Bond subsidiary 2007 financial statements. Shareholder equity in the subsidiary was $356 million as of Dec. 31, up $27 million from the previous year.

The recent volatility in the municipal bond market lowered shareholder equity by $28 million as of March 31, the company said.

MuniMae's shares, which are traded over the counter, fell 62 cents in trading yesterday to close at $3.92 a share.

hanah.cho@baltsun.com