How CDOs Work
Thank you for that excellent explanation endless. I very much appreciate it. I must admit I had very little understanding of CDOs coming into this. A couple questions:
-So restricted cash in the CDOs does nothing to benefit GKK. If it is not used in a deal to keep Realty, what options do they have for using this restricted cash before the reinvestment period expires? What is involved in the "reinvestment" process? Making new loans or buying back CDO notes?
-GKK gets their equity back once the CDOs have completely rundown (barring any discount payoff/default as you stated). How many years will it take for the CDOs to rundown and for GKK to recoup their original equity?
-Is it possible for GKK to build another CDO with their unrestricted cash at corporate? These seem to be widely viewed as "toxic" assets since the meltdown occured. I have no idea if there is any appetite to create new CDOs. If they are unable to build another CDO, what other options might they have for earning a return on their cash?
-A small final point: where do you see that GKK has 52 million common shares outstanding? The sites I looked at all indicated 49.94 million common shares.
Again, thank you for the very thorough response.
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