Description

Laser Mortgage Management (LMM) is a low-risk liquidation play. The shares provide a better than a money-market rate of return coupled with a potential litigation play that could generate a near doubling of one's investment. LMM was formed in 1997 as a REIT to manage a highly leveraged portfolio of mortgage investments. The Company "blew up" with the disclocations created by the demise of Long Term Capital Management.

Recently, LMM distributed $3 per share in cash, after which the Company estimated the remaining book value in the range of $1.15 to $1.35 per share. The remaining assets are largely in cash equivalents so the NAV risk going forward appears extremely small. Management's goal is to make another cash distribution in the fourth quarter of 2002, and if possible, a final liquidating payment in early 2003.

The attraction in these shares is LMM's litigation against Nomura, for about $19 million (equal to about $1.35 per share). It appears that Nomura unloaded a troubled asset from its books into a pool from which LMM bought a low-end tranche. Relatively quickly the property went into foreclosure and LMM had to write off the investment. LMM maintains this property should not have been allowed into the pool. Significantly, LMM's lawyers are willing to handle the case on a contigency basis. Discovery has been delayed because Nomura's offices are located near the former World Trade Center. If this issue is not resolved in the next year, LMM plans to create a liquidating trust for this "asset"

With no apparent risk, a minimum of a better than a market rate of return, and the potential for doubling one's investment, the shares appear to offer exceptional risk/reward characteristics.

Catalyst

Resolution of the LMM suit against Nomura.