Luminent believes it will be able to continue as a going concern, but it will not be as a mortgage REIT. The company has earned $0.92/share in taxable income during 2007, but does not have the liquidity to pay it out any time soon. Luminent implicitly states that it will be unable to satisfy the REIT distribution requirements by assigning a dividend yield of 0% and a weighted average life of 2.9 years to the Arco warrants. Thus, LUM has no expectation of paying out its 2007 taxable income and will have to de-REIT in September.
The Company is still highly reliant on repurchase financing to fund its portfolio, and as recently as this month, it is still fighting collateral seizures by its repo lenders. However, to fully stabilize the portfolio, LUM will have to issue more equity and quickly find long-term financing alternatives, or it will face more forced asset sales. With the likelihood of delisting growing, and no let up in the credit crunch on the horizon, it may soon be lights out at Luminent.