On Thursday January 28, 2016 at 1:04 pm, mortgagemaker wrote on the Yahoo Finance Message Board for TAXI:
“I think that seeing stress in a class of assets at one institution is an excellent “red flag” to examine the performance of similar assets at another institution. From there you need to analyze whether the factors causing stress are having the same impact. In this case I think that any prudent investor will clearly monitor the TAXI figures for signs of further stress. Someone monitoring their cardiac health due to a family history of heart disease is not always going to have a heart attack – the same is true for companies in industries experiencing stress.”
I understand your point now, mortgagemaker. Not being an experienced Wall Street analyst, I must defer to Jay Hickman and others on this one.
There are Best Practices for analyzing the stress in a well-defined class of assets held by a well-defined set of lending institutions who hold these assets.
Taxi medallions from New York, Chicago and Boston are a very well-defined asset class.
The Big Taxi Twelve lenders are the well-defined set of taxi medallion lenders I’ve identified as holding in excess of $100 million of these assets each.
Wall Street analysts can use Best Practices to estimate the effect of this stress on each of these twelve lending institutions.
Jay: please explain what Best Practices you are using in your analysis of TAXI and the other relevant lending institutions for which you have adequate data. All others: please comment.
The peak medallion transfer prices in Q2 2014 were:
New York Independent = $1,050,000
New York Fleet = $1,300,000
Chicago = $375,000
Boston = $700,000
The value of the total medallion market in New York, Chicago and Boston at the peak medallion transfer prices in Q2 2014 was $20.1 billion.
The average values used by Big Taxi lenders to mark to market as of Q3 2015 are:
New York Independent = $650,000
New York Fleet = $875,000
Chicago = $240,000
Boston = $405,000
Using the values above, the value of the total medallion market in New York, Chicago and Boston in Q3 2015 was down to $13.0 billion.
The total face value of medallion debt has been and remains approximately $7.5 billion since Q2 2014.
76% of this debt, $5.7 billion, can be specifically identified in the portfolios of the Big Taxi Twelve lenders who each own more than $100 million in medallion-related assets.
Figure 1: Taxi Medallion Loans Outstanding
|Taxi Medallion Loans Outstanding||Institution|
|$1,500,000,000||Melrose Credit Union|
|$530,000,000||Progressive Credit Union|
|$300,000,000||LOMTO Credit Union|
|$236,000,000||New York Community Bank|
|$170,000,000||Montauk Credit Union|
|$159,000,000||Valley National Bank|
|$5,689,000,000||Big Taxi Twelve|
|$7,500,000,000||Total Medallion Loans Outstanding|
Figure 2: Total Medallion Market Values for New York, Chicago and Boston
|Number of Medallions||Q2 2014 Peak Transfer Price||Q2 2014 Value of Total Medallion Market||Q3 2015 Assumed Average Transfer Price||Q3 2015 Value of Total Medallion Market|
|New York Independent||5,707||$1,050,000||$5,991,867,000||$650,000||$3,709,251,000|
|New York Fleet||7,880||$1,300,000||$10,244,598,000||$875,000||$6,895,402,500|
|Total New York||13,587||$16,236,465,000||$10,604,653,500|
|Total New York, Chicago and Boston||22,312||$20,101,465,000||$12,999,778,500|
Question 1: What values should be used, as a maximum, to mark to market the total medallion market values for New York, Chicago and Boston and the value of the portfolios of the Big Taxi Twelve lenders for Q4 2015?
- New York Fleet = ?
- New York Independent = ?
- Chicago = ?
- Boston = ?
Question 2: Which of the publicly available parameters below should be used to analyze the relative exposure to decreasing medallion values by each of the Big Taxi Twelve lenders given the size and quality of each individual lender’s medallion portfolio?
- Total assets
- Book value
- Net income
- Other publicly available objective values
Ideally a table could be constructed with the twelve institutions in each row and the relevant parameter values in each column.