SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES AND EXCHANGE ACT OF 1934
(Amendment No. 1)*
If the filing person has previously filed a statement on Schedule 13G to report the acquisition which is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the following box: [X]
NOTE: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See Rule 240.13d-7 for other parties to whom copies are to be sent.
*The remainder of this cover page shall be filled out for a reporting person?s initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes).
SCHEDULE 13D
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CUSIP No. 16934Q109
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1 NAME OF REPORTING PERSON
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
Avenir Corporation
I.D. No. 54-1146619
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ]
(b) [X]
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3 SEC USE ONLY
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4 SOURCE OF FUNDS*
OO
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDING IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e) [ ]
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
United States
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7 SOLE VOTING POWER
3,037,059
NUMBER -------- ---------------------------------------------------
OF SHARES 8 SHARED VOTING POWER
BENEFICIALLY
OWNED BY 0
EACH -------- ---------------------------------------------------
REPORTING 9 SOLE DISPOSITIVE POWER
PERSON WITH 3,037,059
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10 SHARED DISPOSITIVE POWER
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH PERSON
3,037,059
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12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES* [ ]
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
7.8%
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14 TYPE OF REPORTING PERSON*
IA
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SCHEDULE 13D
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CUSIP No. 16934Q109
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This Schedule 13D/A ("Schedule") is being filed on behalf of Avenir Corporation
("Avenir"), a Virginia corporation and amends the Schedule 13D filed
on October 21, 2008 on behalf of Avenir. This Schedule relates to the common
stock, par value $0.01 per share, of Chimera Investment Corp, a Maryland
corporation (the "Issuer"). Unless the context otherwise requires, references
herein to "Securities" or "Shares" are to such common stock of the Issuer.
Item 3. Source and Amount of Funds or Other Consideration.
The Securities of the Issuer were primarily acquired on behalf of the
investment advisory clients of Avenir under sole or shared discretionary
authority granted Avenir. In addition, Avenir and/or its principal officers
and employees purchased Shares in the Issuer for their personal accounts. The
aggregate amount of funds used to purchase the Securities reported in this
filing totaled approximately $34,678,748. In addition, none of the proceeds
used to purchase the Securities were expressly provided through borrowings,
though certain accounts managed by Avenir may carry margin balances from time
to time.
Item 5. Interest In Securities Of The Issuer
(a) The aggregate number and percentage of Securities to which this
Schedule 13D relates is 3,037,059 shares of the common stock of the Issuer,
constituting approximately 7.8% of the 38,999,850 shares outstanding.
(b) Avenir generally has the sole power to dispose of or to direct the
disposition of the Securities held for discretionary accounts of its investment
clients, and may be granted the sole power to vote or direct the vote of such
Securities; such powers may be retained by or shared with the respective clients
for shared or non-discretionary accounts, for which Avenir generally makes
recommendations with respect thereto.
(c) All purchase or sale transactions in the Securities during the
past sixty days are set forth on Schedule A.
(d) The investment advisory clients of Avenir have the sole right to
receive and, subject to notice, to withdraw the proceeds from the sale of the
Securities, and the sole power to direct the receipt of dividends from any of
the Securities held for their respective accounts. Such clients may also
terminate the investment advisory agreements without penalty upon appropriate
notice.
(e) Not applicable.
Item 6. Contracts, Arrangements, Understandings or Relationships with Respect
to Securities of the Issuer
The powers of disposition with respect to Securities owned by discretionary
private accounts of Avenir are established in written investment advisory
agreements between clients and Avenir, which are entered into in the normal
and usual course of the business of Avenir as a registered investment advisor
and which are generally applicable to all securities purchased for the benefit
of each such discretionary private account. There are no special or different
agreements relating to the Securities of the Issuer.
The written investment advisory agreements with clients do not contain
provisions relating to borrowing of funds to finance the acquisition of the
Securities, acquisition of control, transfer of securities, joint ventures,
or any of the other transactions listed in the instructions to Item 7 of
Schedule 13D other than voting of proxies. In connection with voting, Avenir
may be allowed or directed to vote the proxies received by accounts classified
as "discretionary" or "shared" accounts; such authority is generally retained
by the clients for accounts classified as "non-discretionary".
Item 7. Material to be Filed as an Exhibit
1) Letter
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SCHEDULE 13D
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CUSIP No. 16934Q109
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SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
October 23, 2008
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Date
/s/ Peter C. Keefe
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Signature
Peter C. Keefe, President
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Name/Title
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SCHEDULE A
PURCHASE ("BY") AND SALE ("SL") TRANSACTIONS WITHIN PAST 60 DAYS
All purchases and sales listed below were normal, open-market transactions.
Average
Transaction Per
Type Date Quantity Total Price Share
BY 8/25/2008 10000 61256 6.13
SL 9/02/2008 3000 19137.39 6.38
BY 9/03/2008 1000 6821.3 6.82
BY 9/04/2008 2750 18518.48 6.73
SL 9/08/2008 117600 858228.7 7.30
BY 9/10/2008 10900 74877.93 6.87
SL 9/11/2008 1000 6552.96 6.55
BY 9/11/2008 13000 85540 6.58
BY 9/12/2008 1220 7767.2 6.37
SL 9/12/2008 1220 7751.15 6.35
BY 9/15/2008 27600 163317.6 5.92
BY 9/18/2008 1400 7023.96 5.02
SL 9/19/2008 31700 203811.5 6.43
BY 9/22/2008 6000 39020.4 6.50
BY 9/24/2008 8100 48140.73 5.94
SL 9/24/2008 7000 41297.66 5.90
BY 9/25/2008 3500 20685.1 5.91
SL 9/25/2008 89500 556586.8 6.22
SL 10/03/2008 8505 48967.63 5.76
SL 10/06/2008 1900 9175.94 4.83
SL 10/07/2008 2430 10695.3 4.40
SL 10/09/2008 640 2769.58 4.33
SL 10/10/2008 27475 97646.58 3.55
SL 10/13/2008 2500 10199.94 4.08
SL 10/15/2008 41650 128417.1 3.08
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EXHIBIT 1
Mr. Michael A. J. Farrell
President
Annaly Capital Management
1211 Avenue of the Americas
Suite 2902
New York, NY 10036
October 21, 2008
Dear Mr. Farrell:
Avenir Corporation controls approximately 8% of Chimera Investment Corporation, managed by Annaly Capital Management's subsidiary, FIDAC. Chimera has recently announced its intention to sell approximately 250 million shares of new common stock. We acknowledge the significant investment opportunity underlying your desire to raise additional capital and FIDAC's ability to deploy this capital effectively.
Since Chimera initially filed for a stock offering in June, we have had several conversations and one meeting with Chimera representatives in order to discuss two troubling corporate governance issues introduced by this proposed underwriting. First, it is highly dilutive to existing stockholders. Second, had you not terminated the incentive component of your management agreement, as was announced yesterday, this offering would have significantly reduced the threshold for payment of incentive compensation to FIDAC, effectively rewarding poor performance. We are therefore pleased by your action, especially since our previous discussions with Chimera had not yielded straightforward responses to either issue. Nonetheless, the matter of unnecessary dilution remains outstanding.
Using an assumed offering price of $4, the offering represents a 35% discount to your September 30 book value estimate of $6.15 per share. In addition, GAAP requires that June 30 book value exclude $2.50 per share in marks-to-market but we believe this amount has real economic value. You apparently agree. Chimera's registration statement includes a forecast of "market price recovery up to or beyond the cost of the investments" (emphasis ours) subject to these marks. While we expect forthcoming September 30 financial statements to show some transfer of unrealized losses to realized, we believe the economic value of the remaining mark-to-market losses may be substantial. Those assets rightfully belong to existing stockholders. For example, if $30 million in marks remain, Chimera's economic value exceeds $6.90 and the proposed equity offering therefore dilutes existing holders in excess of 40%. Viewed from our perspective, the dilution in pro forma economic book value equals roughly $2.55 per share. This is the economic equivalent of a $97 million distribution from existing to new stockholders. We cannot believe this is the intent of a firm with FIDAC's reputation.
You may counter that Annaly's intention to preserve its 9.6% position by participating in the offering means it will absorb the greatest amount of dilution. This argument is not persuasive. Such dilution would be significantly offset by the structure of FIDAC's compensation for serving as Chimera's manager. FIDAC will earn a base fee equal to 1.5% of shareholders' equity, or more than $18 million per year, up from $4 million at the present run-rate, should the offering be completed at $4 per share.
Possibly more injurious to stockholders was the benefit FIDAC stood to gain from favorable benchmarking of its incentive fee calculation. As you are aware, this formula essentially applied a cash return on capital calculation to the "weighted average issue price per share of all our public offerings". By our calculations, this benchmark would have dropped from $15 to about $5.50 per share. While we have no objection to paying for performance, the decision to eliminate this flawed form of incentive compensation is sensible under present circumstances.
We recognize Annaly's important role in supporting Chimera financially, without which Chimera might have failed shortly after coming into being. But as Annaly had the greatest financial exposure in the event of failure, it is reasonable to conclude that Annaly's actions were self-interested. Nonetheless, we appreciate Annaly's support.
We are interested in discussing the possibility of placing Chimera into runoff by allowing the portfolio to amortize over time. Such an action would open various options including paying down debt, reinvesting the principal, or distributing the proceeds as part of a liquidation. Chimera's financing at last appears stable and runoff might be a credible mechanism for closing of the gap between market price and economic value. Perhaps FIDAC can develop an alternate vehicle similar to Chimera through which it could raise the capital sought for exploiting the mortgage-related opportunities in today's market. If FIDAC determines there is no suitable alternative, perhaps a 'make whole' mechanism to compensate existing Chimera stockholders can be developed. In no case should a dollar of the economic value resident in Chimera's portfolio be transferred to owners of new shares.
We do not believe the forgoing issues are the result of a deliberate insensitivity to shareholders. We do believe you have not given adequate thought to the governance issues introduced by your desire to raise additional capital. Periods of difficulty have a way of revealing executives' true nature and orientation toward their owners. Your response will therefore be revealing. We look forward to receiving it and believe our differences can be resolved in a mutually satisfactory manner. Until they are, Chimera's follow-on offering should not proceed.
Very truly yours,
/s/ Peter C. Keefe Peter C. Keefe President |