Hanover Capital looking to raise cash; says it will not declare third-quarter dividend

By Jennifer Lanning Drey

Portland, Ore., Nov. 20 - Hanover Capital Mortgage Holdings, Inc. is in discussions with potential investors in an effort to gain additional capital, which the company may use to invest in the credit markets, John A. Burchett, Hanover's chief executive officer, said Tuesday during the company's third-quarter earnings conference call.

"The current market offers significant opportunities for new capital investments," Burchett said.

"We think there's still good investments to be made and with the current market dislocation, we can make yields similar or greater than we have in the past, with leverage in the past, and without leverage now."

Burchett said it was too early to provide specifics on how the company may raise capital but added that Hanover is exploring a number of options that would preserve value in the portfolio.

"We'll look at all possibilities with our board of directors, viewing what we think is the best answer for the shareholders at the end of the day," he said.

Hanover's operations are not cash flow positive under the one-year master repurchase agreement the company entered into in August with Ramius Capital Group in order to alleviate margin calls, Burchett said.

Under the agreement, the company will be required to repay the outstanding principal through cash or in-kind securities on Aug. 9, 2008.

No Q3 dividend

Hanover also announced Tuesday that its board of directors did not declare a dividend for the third quarter due to the continued uncertainties in the mortgage industry, the current interest rate environment and the company's $31.7 million net loss for the quarter.

The net loss compares with net income of $100,000 during the same period in 2006. The company said the decrease was due primarily to impairment expense of $30.2 million for other than temporary declines in the fair value of the company's subordinate mortgage-backed securities.

Hanover Capital is a mortgage real estate investment trust based in Edison, N.J.

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