(Source: Business Wire)Anthracite Capital, Inc. (NYSE:AHR) (the "Company" or "Anthracite") reported net income (loss) available to common stockholders for the second quarter of 2009 of $(1.39) per share, compared to $0.38 per share for the same three-month period in 2008. (All currency amounts discussed herein are in thousands, except share and per share amounts. All per share information is presented on a diluted basis. Prior year amounts have been restated or reclassified to conform to the 2009 presentation required by the retrospective adoption of FSP APB 14-1, Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement) (''FSP APB 14-1'').)

Operating Earnings (defined below) for the second quarters of 2009 and 2008 were $0.07 and $0.22 per share, respectively. Table 1, provided below, reconciles Operating Earnings per share to diluted net income per share available to common stockholders.

Restructuring of Secured Credit Facilities

During the second quarter of 2009, the Company amended each of its secured credit facilities with Bank of America, Deutsche Bank and Morgan Stanley (the "Secured Creditors"). The facilities have been amended to provide similar terms which, among other things, extend the maturities of all facilities to September 30, 2010 and eliminate all mark-to-market provisions. In addition to eliminating outstanding margin calls and the right to make future margin calls, existing scheduled amortization payments were replaced with cash management requirements as described below. The new interest rate on the facilities is the greater of 30-day LIBOR plus 3.50% or 5.50%.

The Secured Creditors continue to hold the same primary collateral consisting of U.S. and non-U.S. denominated commercial real estate loan assets. All cash received from these assets will first be used to pay interest and then to reduce the respective lender's principal balance. The Company has agreed that the principal balance for each Secured Creditor will be reduced through this process by an agreed upon amount, measured on a cumulative basis, at the end of each quarter starting with the period ending September 30, 2009. If such required reduction is not satisfied, the Company has 90 days to cure such shortfall or an event of default would occur.

In addition, the Secured Creditors received a security interest in all unencumbered assets of the Company as well as a subordinated second lien on each other's primary collateral. The cash flows generated by the bulk of the formerly unencumbered assets will be deposited monthly into a cash management account that will be available for use by the Company for its operations pursuant to a prescribed budget subject to (i) no defaults under the facilities and (ii) the cure of any outstanding deficiency in the required reductions of the principal balance of any Secured Creditor. In the event of an uncured event of default, the cash management account proceeds must be used to pay down the relevant lender's debt until the deficiency has been cured.

The existing financial covenants were modified and apply to the Company under each facility as follows:

Tangible net worth (as defined in each applicable facility) cannot fall below $400 million (plus 75% of any equity offering proceeds) at any quarter end, and cannot fall (with certain exclusions) by more than 20% in any one quarter or more than 40% in any four quarter period;

Debt service coverage ratio must (as defined in each applicable facility) be at least 1.40; and

Total recourse debt to tangible net worth ratio may not exceed 2.5.

The Company also agreed to certain other terms which establish(i) certain required quarterly operating earnings, (ii) restrictions or conditions on the incurrence or restructuring of any indebtedness and the payment of fees and other amounts to BlackRock Financial Management, Inc. (the "Manager") and its affiliates, (iii) limits on acquiring new assets and (iv) required minimum quarterly operating earnings for each quarter of the extended term, commencing with the quarter ended June 30, 2009. In addition, certain definitions, including an event of default, under each facility were made substantially uniform among the facilities.

The maturity date for each facility may be further extended to March 30, 2011 at the discretion of the respective Secured Creditor. However, if certain conditions are met, the decision by a lender to not extend may result in such lender losing the benefit of certain new collateral received under the restructuring.

In addition, the waiver of covenant breach under the Company's secured credit facility with Holdco 2 related to the failure of the Company to repay certain borrowings due under such facility has been extended through October 22, 2009.

Restructuring of Unsecured Debt

In May and July 2009, the Company restructured a significant portion of its trust preferred securities and junior subordinated notes.

Pursuant to an exchange agreement with certain holders of the Company's $135 million in trust preferred securities and €50 million junior subordinated notes, the Company issued $168.75 million and €62.5 million principal amount of new junior subordinated notes in exchange for those securities. The exchanges closed on May 29, 2009.

The new notes bear a fixed interest rate of 0.75% per year until the earlier of May 29, 2013 and the date on which the Company's senior secured credit facilities with Bank of America, Deutsche Bank and Morgan Stanley have all been paid in full (the "Modification Period"). The interest rates on those securities were, as of the date of the exchanges, 7.50%, 7.73% and 7.77% per year on the trust preferred securities and EURIBOR plus 2.60% per year on the junior subordinated notes. After the Modification Period, the new notes bear interest at the same rates as the securities for which they were exchanged. The new notes are contractually senior to the Company's remaining trust preferred securities. The new notes otherwise generally have the same terms, including maturity dates and capital structure priority, as the securities for which they were exchanged.

The coupons that were due on April 30, 2009 on certain of the securities being exchanged were satisfied by payments at the new lower rate of 0.75% per year on the increased principal amounts.

On July 22, 2009, the Company issued $31,250 aggregate principal amount of junior unsecured subordinated notes (the "Notes") in exchange for $25,000 aggregate liquidation amount of trust preferred securities of Anthracite Capital Trust I (the "Exchanged Securities").

The Notes bear a fixed interest rate of 0.75% per year until the earlier of (i) July 22, 2013 and (ii) the date on which all of the existing senior secured loans under the Company's senior secured credit facilities with Bank of America, Deutsche Bank and Morgan Stanley are fully amortized, including certain deferred restructuring fees (the "July 22 Modification Period"). After the July 22 Modification Period, the Notes bear interest at the same rate as the Exchanged Securities. Interest payments are payable quarterly, commencing on July 30, 2009. The first interest paymentdue on July 30, 2009 under the Notes is for the interest period from April 30, 2009. Allobligations underthe Exchanged Securities, including accrued and unpaid interest thereunder, were accordingly fully discharged and satisfied.

The Notes are contractually senior to the Company's remaining trust preferred securities, and otherwise generally have the same terms, including maturity date, as the Exchanged Securities.

As a result of the restructuring, during the Modification Period and the July 22 Modification Period, the Company is subject to limitations on its ability (i) to pay cash dividends on shares of its common stock or preferred stock, or redeem, purchase or acquire any equity interests and (ii) to create, incur, issue or otherwise become liable for new debt other than trade debt, similar debt incurred in the ordinary course of business or debt in exchange for or to provide the funds necessary to repurchase, redeem, refinance or satisfy the Company's existing secured and senior unsecured debt. In addition, during such periods, the cure period for a default in the payment of interest when due is three days.

On May 27, 2009, in a privately negotiated exchange transaction with a holder of Anthracite's 11.75% Convertible Senior Notes due 2027, the Company issued 850,000 shares of common stock in exchange for $4 million principal amount of the notes.

On July 1, 2009, in a privately negotiated exchange transaction with a holder of Anthracite's 11.75% Convertible Senior Notes due 2027, the Company issued 900,000 shares of common stock in exchange for $3 million principal amount of the notes.

On July 29, 2009, the Company issued 1,317,000 shares of its common stock in exchange for $3,951 aggregate principal amount of its 11.75% Convertible Senior Notes due 2027 in a privately negotiated exchange with a holder of such notes.

The Company estimates that the effect of the combined unsecured restructurings and exchanges will result in cash savings of over $13 million per year during the period that the lower coupons are in effect. The Company intends to use cash from these savings for general corporate purposes and to reduce indebtedness under its senior secured credit facilities.

Effect of Market Conditions on the Company's Business & Recent Developments

During 2008 (particularly in the fourth quarter) and 2009, global economic conditions continued to worsen, resulting in ongoing disruptions in the credit and capital markets, significant devaluations of assets and a severe economic downturn globally. Assets linked to the U.S. and non-U.S. commercial real estate finance markets have been particularly affected as demand for such assets has sharply declined and defaults have risen significantly for CMBS and commercial real estate loans. Available liquidity, which began to decline during the second half of 2007, became scarce in 2008 and remains depressed into 2009. Under normal market conditions, the Company relies on the credit and equity markets for capital to finance its investments and grow its business. However, in the current environment, the Company is focused principally on managing its liquidity.

The recessionary economic conditions and ongoing market disruptions have had, and the Company expects will continue to have, an adverse effect on the Company and the commercial real estate and other assets in which the Company has invested. These effects include:

Adverse impact on liquidity and access to capital. The Company's unrestricted cash and cash equivalents decreased to $2,429 at June 30, 2009 from $9,686 at December 31, 2008 due to, among other things, amortization payments under the Company's secured credit facilities and reduced cash flow from investments. As a result of a continued rise in delinquencies in commercial real estate loans and CMBS during the second quarter of 2009, the Company's cash flow has been materially and adversely affected. This negative trend has continued into the third quarter of 2009 and the Company believes this negative trend will continue into the foreseeable future. The Company is required to make an interest payment of $4,056 on September 1, 2009 related to its senior unsecured convertible notes. In addition, pursuant to the amendments to its secured facilities with Bank of America, Deutsche Bank and Morgan Stanley which closed in May 2009, the Company is required to make quarterly payments to reduce the principal balances under the facilities by certain specified amounts as of the end of each quarter, commencing for the quarter ended September 30, 2009. The Company's current projections show that the Company will not be able to meet the aforementioned principal paydown requirements for certain secured lenders on September 30, 2009. If the Company does not satisfy these paydown requirements, the Company has 90 days to cure such shortfall or an event of default would occur. However, the Company may not have the liquidity to cure such shortfall, if it were to occur, while meeting the Company's other obligations after September 30, 2009, and the Company then would not be able to continue as a going concern. The Company continues to seek ways to refinance or restructure its unsecured indebtedness, thereby reducing its interest expense and improving liquidity. These efforts include the debt-for-equity exchange and junior unsecured subordinated debt restructurings described above. The Company will endeavor to complete additional debt-for-equity exchanges to reduce the $4,056 interest payment due on the convertible notes on September 1, 2009, thereby increasing the funds available to meet the secured lenders principal paydowns due by September 30, 2009. No assurance can be given that this endeavor will be successful. In addition, financings through collateralized debt obligations (''CDOs''), which the Company historically utilized, are no longer available.

Negative operating results. For the six months ended June 30, 2009 the Company incurred a net loss of $(89,058) driven primarily by significant net realized and unrealized losses, the incurrence of a $104,532 provision for loan losses and a loss from equity investments of $(18,690).

Change in business objectives and dividend policy. The Company is currently focused on managing its liquidity and, unless its liquidity position and market conditions significantly improve, anticipates no new investment activity in 2009. In addition, the Company's Board of Directors (the ''Board of Directors'') anticipates that the Company will only pay cash dividends on its preferred and common stock to the extent necessary to maintain its REIT status until the Company's liquidity position has improved subject to the following restrictions. Under the junior subordinated indentures the Company entered into on May 29, 2009 and July 22, 2009 in connection with its exchange agreements with the beneficial owners of certain of the Company's TruPS and junior unsecured subordinated notes, until the earlier of (i) May 29, 2013 for certain junior unsecured subordinated notes and July 22, 2013 for certain other junior unsecured subordinated notes and (ii) the date on which all of the existing senior secured loans under the Company's secured credit facilities are fully amortized, including certain deferred restructuring fees, the Company is prohibited from making payments on its capital stock, including its common stock, other than (a) with the consent of a majority of the holders of the notes issued under the indentures or (b) dividends or distributions reasonably necessary to maintain its REIT status; provided that such dividends or distributions, (A) to the extent paid to its common stockholders, are not in excess of $2.5 million in the aggregate and are in the form of its common stock to the maximum extent permissible to maintain its REIT status (the "Permitted Distribution"), and (B) to the extent paid to the preferred stockholders, are in an amount no greater than that required to be distributed to such holders in order to make the Permitted Distribution to its common stockholders.

These effects have led to the following adverse consequences for the Company:

Substantial doubt about the ability to continue as a going concern. The Company's independent registered public accounting firm issued an opinion on the Company's December 31, 2008 consolidated financial statements that stated the consolidated financial statements were prepared assuming the Company will continue as a going concern and further stated that the Company's liquidity position, current market conditions and the uncertainty relating to the outcome of the Company's then ongoing negotiations with its lenders have raised substantial doubt about the Company's ability to continue as a going concern. As noted above under the bullet captioned "Adverse impact on liquidity and access to capital", substantial doubt continues to exist about the Company's current ability to continue as a going concern.

Reduction or elimination of dividends. The Board of Directors did not declare a dividend on the Company's common stock and preferred stock for the first and second quarters of 2009. Due to current market conditions and the Company's liquidity position, the Company's Board of Directors anticipates the Company will pay cash dividends on its stock only to the extent necessary to maintain its REIT status, subject to the following restrictions. As noted above under the bullet captioned "Change in business objectives and dividend policy", the Company is subject to limitations on dividends it may pay on its common and preferred stock under certain of its junior subordinated notes indentures. To the extent the Company is required to and permitted to make distributions to maintain its qualification as a REIT in 2009, the Company may rely upon temporary guidance that was issued by the Internal Revenue Service (''IRS''), which allows certain publicly traded REITs to satisfy their net taxable income distribution requirements during 2009 by distributing up to 90% in stock, with the remainder distributed in cash. However, the terms of the Company's preferred stock prohibit the Company from declaring or paying cash dividends on the common stock unless full cumulative dividends have been declared and paid on the preferred stock.

CDO tests

In addition to the covenants under the Company's secured credit facilities, four of the seven CDOs issued by the Company contain compliance tests which, if violated, could trigger a diversion of cash flows from the Company to bondholders of the CDOs. The Company's three CDOs designated as its high yield (''HY'') series do not have any compliance tests. The chart below is a summary of the Company's CDO compliance tests as of June 30, 2009.