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Zz, you had wondered about the lenders, and had expressed some potential concern that this could cause a liquidity crunch for Annaly. Inspired by David (TMF Wysocki), I phoned Annaly IR jsut now and got some additional info that I posted on the II board, but want to share here, too.


Margin Calls
Annaly hasn't had any unusual margin calls today or this week. I was surprised to find out that margin calls are a regular and normal part of their business, that they receive every day. It's just the way they operate. As long as they make their payments, there's no issue, and there's been no issue for Annaly.

Annaly keeps a "Box" with liquid assets/cash available to handle any unusual margin calls, to provide an added level of resources and safety. This is beyond the $110M they showed on the balance sheet, and totals about $7M, if I understood her correctly.

Leverage
Carlyle is leveraged 32 - 1
Thornberg is leveraged 16 - 1
Annaly is leveraged 8.7 - 1

Assets
Although the others also use FNM and FRE, the type of assets they purchase is very different. They have a much higher percentage of CMO -- read, derivatives -- than Annaly. Although Annaly has some, it's a small percentage (8%).

ALL of Annaly's assets carry the actual or implied guarantee of the U. S. Government.

ALL of Annaly's assets are highly liquid, because of their high quality.

ALL of Annaly's assets produce cash flow that the company receives twice a month that provides additional liquidity to use to pay off their regular margin calls.

Institutional Relationships
Regarding their lenders, Annaly has relationships and lines with 34 institutions. By policy, they can borrow up to 30% of their needs from one institution. They're nowhere near that amount with any institution. This gives the lenders confidence, as it minimizes any risk they have to bear.

These are key differences between Annaly and these other mREITs. When we talk about "Quality of Management," this is really what we're talking about. This is very reassuring to me as an investor; as the IR rep said, "This is the ideal operating environment for Annaly" (with the sharp Yield Curve).

I am very confident, more than ever, in my investment in this company.

Best,
Arch
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