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Burnt trying to leverage

Chimera was quietly struggling to stay afloat after levering up at just the wrong time -- levering up four-fold just as competitor MFA Mortgage (MFA) was selling assets to de-lever its balance sheet.

After torching MFResidential's planned IPO, the poor conditions in the non-agency RMBS market chopped into Chimera, who slashed its quarterly dividend by 37.5%.

Matthew Lambiase, CEO and President of Chimera, commented on the dividend situation thusly: “Specifically, conditions compelled us to adjust our ramp-up pace and run our leverage at a more defensive level as we headed into the second quarter.”

In other words, maybe that $500 million repo facility with CSFB and a $350 million repo line with Deutsche Bank back in January wasn't such a good plan.

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