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MuniMae cuts dividend, delays results again

The Baltimore Sun

Municipal Mortgage & Equity LLC said yesterday that it was cutting its dividend - after 43 consecutive quarters of dividend increases - and that it doesn't expect to meet a March 3 target date to file audited financial statements for 2006.

The dividend cut might further discourage investors, who have already knocked down the share price as the company has worked for more than a year to restate its earnings and balance sheet. The failure to complete reports by March 3 means the company would no longer be listed on the New York Stock Exchange, trading over the counter instead.

The Baltimore company, better known as MuniMae, arranges financing for housing developers and for renewable energy projects.

The announcements came after the close of stock markets yesterday. MuniMae shares stood at $17.20 - down by nearly half from the high of $32.20 on Dec. 29, 2006.

Given the history of raising the dividend every quarter since the company went public in 1996, a dividend cut was "not something we take lightly, but we thought it was best for the shareholders," said Michael L. Falcone, chief executive officer. He said the company needed to conserve capital to grow.

The dividend, which was 52.5 cents a share last quarter, will be 33 cents for the current quarter, a reduction of 37 percent. On an annualized basis - the board of directors can change the dividend each quarter - and given that MuniMae has 38.4 million shares outstanding, the reduction would free up about $30 million in capital.

There are three reasons the company wants to hold onto more operating cash, Falcone said:

The cost of the financial restatement. "We're spending a lot of money to get this right," Falcone said, although he said he could not discuss the specific amount.

Volatility in the credit and capital markets. MuniMae depends on a variety of investors, such as banks and pension funds, to buy shares in the deals it puts together to finance projects.

Growth in its new renewable energy business, which might need more capital. Deal volume in that segment was $234 million in 2007, up four-fold from the year before, when MuniMae entered that line of business.

Overall, MuniMae said, its "production," or deal volume, was $4.2 billion in 2007, up from $3.7 billion in 2006. Although it can't announce financial results until its accounting restatements are complete, a MuniMae statement said that "margins have held up well across the majority of its business lines."

The company functions as a middleman in arranging financing for real estate and renewable energy deals. It also buys and sells tax credits from affordable housing projects and from renewable energy. It makes money by collecting fees, or by selling shares in tax credits for more than it paid. It has about 525 employees, including about 125 at its Baltimore headquarters.

Its accounting problems developed as its deals became more complex and as accounting rules changed. It has switched auditors and brought in consultants to get its books straightened out.

The company hasn't filed financial statements since August 2006. The New York Stock Exchange set a deadline for filing statements, then extended it by six months to March 3.


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