IPO Filing: Chimera, A Vulture Fund With Annaly (CIM, NLY)

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Annaly Capital Management, Inc. (NYSE:NLY) announced the filing for an IPO of Chimera Investment Corporation under the NYSE tick "CIM."  Chimera is a newly-formed specialty finance company that will invest in residential mortgage loans, residential mortgage-backed securities, real estate-related securities and various other asset classes.  Does this sound like a vulture fund to you?  It should.  For filing purposes it lists up to $250 million in common stock that it will sell, although that number could easily change.

Chimera will be externally managed by Fixed Income Discount Advisory Company, or FIDAC, a wholly-owned subsidiary of Annaly, a New York Stock Exchange-listed real estate investment trust. Concurrent with this offering, Annaly will acquire 9.8% of Chimera’s outstanding shares of common stock after giving effect to the shares issued in the offering. Chimera intends to elect and qualify to be taxed as a REIT for federal income tax purposes.

Merrill Lynch & Co. will act as the sole lead manager and book-runner for the proposed offering.  Since this is a new company, there are no real financials and there is no real operating history.  It says it will focus on higher quality residential mortrgage loans, but it lists that it can look right down into asset-backed securities, commercial mortgage backed securities, and CDO’s.  This was filed ahead of the discount rate cut today, but this looks to be the first new public distressed fund filing out there.   

They arent calling it a vulture fund, but it is.  Chimera in mythology is a creature made up of multiple creatures.  And it’s a mean one.

Jon C. Ogg
August 17, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he is the publisher of the 24/7 Wall St. Special Situation Investing Newsletter and does not own securities in the companies he covers.