Creditors SeizeHanover Portfolio.(Hanover Capital Mortgage Holdings Inc.)(Financial report)

Byline: Ted Cornwell

Edison, NJ-The meltdown of subordinate MBS values took a heavy toll on Hanover Capital Mortgage during the second quarter, and the company had to surrender its subordinate MBS portfolio to its primary lender.

"The market for mortgage-related securities continued to deteriorate during the second quarter. As a result, we repaid our repo line using the collateral as payment," Hanover's president and CEO, John Burchett, said in the company's financial report. "We continue to seek additional capital or alternatives for the future and are working with our financial advisor for this purpose."

Using the collateral to repay its repo line creditor, the hedge fund Ramius reduced the company's assets by $43 million and its liabilities by $85 million, Mr. Burchett said. The repayment of the repo line with collateral occurred in early August and will be reflected in Hanover's third-quarter results.

As of June 30 - prior to the surrender of those assets - Hanover reported total assets of $62.2 million.

In a conference call for investors, Mr. Burchett said holders of the company's trust-preferred securities will play a large role in determining the company's future. He suggested that Hanover retains the ability to provide advisory services, and that it may seek a merger or recapitalization from investors interested in the company's platform and REIT status. ...