Apollo's Realogy Seeks Debt Exchange to Avoid Default (Update4) By Caroline Salas and Pierre Paulden Nov. 14 (Bloomberg) -- Realogy Corp., owner of the Century 21 and Coldwell Banker brands, is at risk of violating the terms of its bank loans and is offering to exchange about $1.1 billion of bonds at a discount for new debt. Leon Black's buyout firm Apollo Management LP, which bought Realogy for $6.6 billion in April 2007, is trying to reduce debt by almost $600 million and stave off default at the Parsippany, New Jersey-based real-estate broker, according to a regulatory filing dated yesterday. ``It's kicking the default can further down the road,'' said Christopher Garman, chief executive officer of debt research firm Garman Research LLC in Orinda, California. ``All parties have an interest in keeping companies away from default.''
It is amazing how a company as broad and deep as Realogy did not follow the axiom, "lead with revenue". As some homeowners now know, that you can not leverage forever, at sometime you must balance your books. We are in a housing crisis for a whole host of reasons but some of the primary reasons are as follows:
- Markets will always continue to rise. False, markets over a ten year time frame will appreciate but during that ten year time frame there will always be corrections.
- Stated income and no documentation. We became part of a culture of must have no matter what. If our income doesn't justify a home loan, fudge your income numbers till you get the right ratio.
- We can spend our way out of a jam. False, at some time the bills will mount over time and we can no longer leverage the equity in our homes and credit cards.
- The more we have on paper the greater our worth. True, until the market turns south and our worth disappears quicker than it appeared.
That is why so many homeowners are facing foreclosure. If it can happen to a company like Realogy it can happen to anyone. Does anyone think that C-21, Coldwell Banker, or ERA could go bankrupt and fold, listen to Kathleen Howley of Bloomberg news:
NRT's parent Realogy Corp., owned by Leon Black's Apollo Management LP, has at least $875 million of debt that has an 89 percent chance of defaulting within five years, credit-default swaps tracked by London-based CMA DataVision indicate.
By contrast, Keller Williams Realty which is the fourth largest Real Estate Company in North America has zero short term and zero long term debt. Keller Williams follows the axiom lead with revenue and cut expenses wherever and whenever you can.
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