Deerfield Posts Large Q4 Net Loss

Core earnings in Q4 were $3.3 million, $0.49 per share; while core earnings for the previous year totaled $32.3 million, $4.96 per share. At the beginning of 2009, Deerfield had $10.5 billion of assets under management in 27 collateralized debt obligations.

Company executives say the large Q4 loss was heavily impacted by $116.2 million of unrealized losses on loans from mark-to-market writedowns.

"Financial market conditions remained challenging in the final quarter of 2008," says CEO Jonathan Trutter. "Mark-to-market charges on loans held for sale together with further deterioration in market prices of syndicated bank loans represented the majority of the losses in the quarter. Any recovery in the market prices of those loans would allow us to recapture certain of our unrealized book losses."

Trutter believes 2009's numbers will not be as bleak, due in large part to the expected economic turn-around. "In 2009, our financial results will reflect the expected recovery in asset values, the launch of any new investment products to be managed through our Investment Management segment and the full benefit of our recent cost savings initiative," Trutter says. "We believe that our core investment management business is competitively positioned for the future."

Deerfield is committed to growing its investment management business by starting new investment products "that will diversify our revenue streams and take advantage of our core competencies of credit analysis and asset management," executives say. The company will continue to redeploy capital to additional fee-based strategies and sell corporate loans held outside of Market Square CLO Ltd. and DFR Middle Market CLO Ltd.

During Q4, Deerfield decreased its assets under management through the liquidation of Bryn Mawr CLO II Ltd., Access Institutional Loan Fund and a government arbitrage investment fund. In February, the firm began to manage a $137 million European CDO, Mayfair Euro CDO I B.V. So, at the beginning of March, Deerfield held $10.4 billion os assets under management.