We disagree completely with the inclusion of Realogy on such a ridiculous and subjective list that originated as a blog post but is now masquerading as a "news report" elsewhere on the Internet. As of January, there were 88 other companies with the identical Moody's Speculative-Grade Liquidity rating as Realogy. Our company has the best brand networks and the most successful brokers and agents along with the most seasoned management team and the best employees in the industry.

Although Realogy is currently in a quiet period pending the release of our fourth quarter 2008 earnings results in March, I would like to address a number of fundamental truths about Realogy that were clearly not taken into consideration in this flawed analysis:

• During the past several years Realogy has moved aggressively to mitigate the impact of the economy on our company. We have successfully reduced our overhead by more than $350 million and continue to focus on maximizing the effectiveness of our cost structure.
  
• As we have focused on costs we have been equally focused on growth. In spite of the woes of the housing market we have made great progress in advancing our company. From new franchise sales to the retention of the top-tier brokers and sales associates to signing new clients across all of our business units, we continue to be forward thinking and highly focused on the future of our company and the industry.
  
• In 2009, we expect to benefit from considerably lower interest rates since a significant portion of our bank debt is tied to LIBOR;
  
• None of our corporate debt is due until at least 2013; and
  
• Unlike many companies in today's economy, we have the support and commitment of one of the best financed private equity firms in the country, Apollo Management. Private equity funds managed by Apollo Management and co-investors originally invested $2 billion in Realogy so clearly Apollo has a substantial ongoing interest in the success of Realogy. If there is any question as to Apollo's overall financial strength, one need only look to Apollo's success in raising approximately $15 billion in capital last month for its newest investment fund.

In summary, your readers who take the time to do their own due diligence should recognize that Realogy is one company that will survive in 2009.

Mark Panus
Senior Vice President of Corporate Communications
Realogy Corporation

Coldwell Bankewr will continue to provide top quality service. It doesn't really matter if REOLOGY or any of the corporate veils survive, the names Coildwell banker, ERA and C0-21 will continue to be represented by high caiber agents in all markets who will continue to work from their markets as their brand is owned by another investor. I haver worked for three different companies from the same desk in 12 years. MY ability to professionaly interpret the market and ethicly represent my clients needs will survive longer than the corporations that I use for support. 

Thank you Mark for responding to this post and clearing up any rumors or misunderstandings! 

I work for the Newport Center office, the #1 office of all Coldwell Banker offices and am very proud to work for CB, NRT, Realogy as an agent.  

I will continue to work as hard as I can in this and every real estate market.   I think the best defense is - for us is to roll up our sleeves, put ourselves in front of as many prospects as possible, do a great job for our current clients, conduct our business in the most ethical way to ensure integrity for our industry and continue our education so we can provide the best information to our local markets.

In addition, it is not "Game Over" for Coldwell Banker or NRT!  Be assured of that!

Chris

Great post.  This is what I love about Blogging.  This gets people in our industry to wake-up and engage in dialogue.  Keep up the good work!

Mark Panus came out swinging? WAKE UP PEOPLE!! Every big corporation has a VP of Communications whose sole responsibility is to mitigate any bad press, regardless of truthfulness. Just look at press releases from 6-12 months ago from companies that are now begging for bailout money. Of course Mr. Panus will copy, paste ad post the bullet points that have been rehashed and authorized by marketing, legal, and every other VP sitting at the conference table at 1 Parsippanny Dr. !!!! It's pure corporate marketing! He talks due diligence??? Let's look at what he said a little more carefully: 

• During the past several years Realogy has moved aggressively to mitigate the impact of the economy on our company. We have successfully reduced our overhead by more than $350 million and continue to focus on maximizing the effectiveness of our cost structure. *****LET'S LOOK AT THE "PAST SEVERAL YEARS" IN LATE 2006 REALOGY AGREED TO BE ACQUIRED BY APOLLO FOR $7-8 BILLION. APOLLO PUT APPROX $2B, WITH REALOGY ASSUMING THE BALANCE BY ISSUING BONDS, DEAL CLOSED IN MID-2007, AND IN MARCH OF 2008 HAD TO ISSUE MORE DEBT JUST TO PAY OF THE EXISTING DEBT. THEN IN LATE 2008, TRIED TO CONVERT $1.5B IN BONDS TO $500M - AND GUESS WHAT, THE BONDHOLDERS (CARL ICAHN) SUED IN DELAWARE COURT AND THE JUDGE RULED THAT REALOGY'S ACTIONS WERE NOT LEGAL. FACT: REALOGY CAN'T MAKE THE INTEREST PAYMENTS ON EXISTING DEBT. REDUCING OVERHEAD BY $350M IS A DROP IN THE BUCKET!
  
• As we have focused on costs we have been equally focused on growth. In spite of the woes of the housing market we have made great progress in advancing our company. From new franchise sales to the retention of the top-tier brokers and sales associates to signing new clients across all of our business units, we continue to be forward thinking and highly focused on the future of our company and the industry. THIS STATEMENT IS BASICALLY A TV COMMERCIAL, ADVERTISING TO LOOK GOOD. NO HARD DATA, NO FACT TO EVALUATE. BEING FORWARD THINKING AND HIGHLY FOCUSED DOES NOT PAY THE BILLS. COUNTRYWIDE, LEHMAN, THEY ALL "TRIED HARD" DO SOME REAL, DEEP, RESEARCH. THEIR INVESTOR CALL IN MARCH WILL SHED SOME LIGHT ON THIS, BUT AS A PRIVATE COMPANY THEY DONT HAVE TO RELEASE ANYWHERE NEAR AS MUCH AS A PUBLIB COMPANY.
  
• In 2009, we expect to benefit from considerably lower interest rates since a significant portion of our bank debt is tied to LIBOR; GRANTED, AS WILL NEARLY EVERY BORROWER ON THE PLANET. AND THE DEFINING STRATEGIC ADVANTAGE TO REALOGY IS? THE UNDERLYING PROBLEM IS THE PRINCIPAL, NOT THE INTEREST! THIS IS LIKE AN OBESE PERSON CLAIMING THAT THEY WILL LOSE WEIGHT BY GOING FROM 50 BOWLS OF FROSTED FLAKES A DAY TO 50 BOWLS OF CORN FLAKES.
  
• None of our corporate debt is due until at least 2013; and INTEREST PAYMENTS ARE STILL DUE, AND IF THIS ISN'T A PROBLEM, THEN WHY DID REALOGY ATTEMPT AN "END RUN" AROUND IT'S BOND-HOLDERS? 
  
• Unlike many companies in today's economy, we have the support and commitment of one of the best financed private equity firms in the country, Apollo Management. Private equity funds managed by Apollo Management and co-investors originally invested $2 billion in Realogy so clearly Apollo has a substantial ongoing interest in the success of Realogy. If there is any question as to Apollo's overall financial strength, one need only look to Apollo's success in raising approximately $15 billion in capital last month for its newest investment fund. APOLLO LET LINENS'N THINGS CLOSE UP SHOP. I WOULD SAY ENOUGH SAID, BUT PLEASE DON'T BE FOOLED BY CORPORATE-SPEAK. IN DEFERENCE TO MR. PANUS, HE HAS TO SAY THESE THINGS. IT'S HIS JOB. THE TOP BRASS MUST FIND WAYS TO PROJECT SOME POSITIVES, BUT IN THIS THOSE ARE FAR OUTWEIGHED BY THE COLD, UNCOMFORTABLE FACTS.

Of course Realogy won't issue a press release talking about how the value of their bonds are nearly worthless, they won't talk about losing a court case by trying to cut their debt by two-thirds by a disallowed transaction. Hwever, analysts and reputable publications, i.e. Wall Street Journal, will give all of us a far more accurate pucture than the marketing department of said company.

Chris,

Thanks for being objective in your post. In times like this it doesn't matter if you are big or small, we must all work together to support not just ourselves but the industry as a whole. Only focus on what you can control... behind the scenes at Realogy there is a team of people whose only job right now is to try and help companies within our network that are failing. That help is coming  in many different ways, and for many it will mean the difference between success or failure in the months to come. As we come out of this, the heroes will be the companies who right sized their operations to succeed. The losers will be those who stood by and criticized the actions of others. Continued to success to you...

This is an older Blog, but Realogy's Q1 results came out earlier this month  <www.sec.gov/Archives/edgar/data/1355001/000119312509108447/d10q.htm> and I'll use this more recent info to make some observations - particularly since none of the leading financial media (WSJ, Bloomberg, NYT, Barron's) seem to have done any analytical reporting on it.

1.) A reflection of investor confidence is that Realogy's notes (fixed rate senior, senior toggle, and senior subordinated) are valued at a fraction of their carrying amount (28%, 18%, and 17% respectively per the latest 10-Q, pg. 12).

2.) The first quarter 2009 commission volume (for Realogy's franchise companies & owned brokerages combined) was down some 30% vs. Q1 2008 (pg. 40).  

3.) On 3/31/09 Realogy had negative net worth of $997mx (vs. a neg. $740mx on 12/31/08.)  When I was in business school (way back in the dark ages when a company's Balance Sheet received no less attention than its Income Statement) we called this "insolvency". I'm not sure what descriptive term is used in today's more sophisticated world... perhaps it's called "forward thinking".

4.) At the end of Q1 2009, Realogy reported a Current Ratio of 54%: Current Assets of $1.338 billion and Current Liabilities of $2.484 billion. 

5.) Realogy's Mr. Panus points out that Realogy has reduced overhead and is focusing on its cost structure. This is fine as far as it goes, but it may be noted that Realogy reports a first quarter Total Expenses reduction of 24.5%, vs. 2008, but a Net Revenues reduction of 33.7% vs. Q1 2008.  

5.) Mr. Panus's statement that none of their corporate debt "is due until at least 2013" is correct regarding the debt's Principal. However the fact remains that their debt service payments must be made   each   and   every   quarter.

6.) Now in one sense, none of the above weaknesses would critical IF Realogy's near term cash flow situation was favorable. However it's difficult to find satisfactory signs on that.  Their current available cash balance appears to have only been possible because of their $600mx revolving credit facility, which source has now been maxed out. And while Apollo announced in March that they would if necessary step in with an additional $150mx, this amount only represents a single quarter of debt service ($144mx in Q1).             

7.) Given the last two years' trends in Realogy's financials, unless: a.) a substantial & adequate debt restructuring is accomplished, or b.) Apollo is willing to kick in truly adequate additional capital, or c.) an immediate & major shift occurs in the company's underlying business, then it's probable that Realogy will experience "an event of default" sooner rather than later. The company clearly acknowledges this risk in its 10-Q (remarks on pp. 1 & 2.)

8.) This does not mean that Realogy's real estate brands or all their related brokerage companies would disappear - they would not.  But it'd be a major hiccup, and would likely draw more attention to the question of how much support the brokerages receive from corporate on their core business.