FINOVA FULL FRONTAL FANTASY

MID-MARCH, 2010

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- BERKADIA…CAPMARK…FINOVA…$1.7 BILLION NET OPERATING LOSS

- BERKSHIRE HATHAWAY’S “TERRIFIC EXPERIENCE” WITH JOE AND IAN

- MY DELUSIONAL MATHEMATICAL FANTASY ABOUT THE ‘VALUE’ OF FINOVA

- SCARY-SOUNDING TERMINOLOGY II; FORM 15 AND ‘GOING DARK’

- CENTERLINE AND ITS NOL; EXAMPLE IS ALMOST IDENTICAL TO BERKADIA/CAPMARK

- FREDDIE MAC COINCIDENTALLY DESCRIBES CENTERLINE AND BERKADIA IN THE

SAME PARAGRAPH

-PROTECTIVE PRODUCTS of AMERICA; CHAPTER 11, DELISTING, AND PROTECTING

NOL’S IN ONE EASY SUMMARY

-AN OPEN INVITATION FOR YOU, OR MISTER CUMMING, TO BUY ME A LAHJ ITALIAN

Hello again, fearless readers!

It’s been about three months since my last confession, and plenty has happened in the world of
Finova, delisting, and NOL’s, so let’s get right to it. Much of this discussion will relate directly to Finova,
but I have also included a ton of anecdotal stuff that is more for illustrative purposes. As always, I have
airtight, unassailable references, and I encourage you to click all the links, and read everything. I want
you to follow all of my sources, so you can clearly distinguish between my silly made-up theories and the
cold, hard, verifiable facts.

Fair warning; I’ve started getting carried away with the italics, (as if my points need any more
emphasis). Italics are the equivalent of me yelling at everyone. When you see the italics, picture me
pacing up and down the room, lecturing, wearing a hole into the carpet. You are all seasoned pros by now
anyway, but I feel like I must lead off with my typical disclaimer. If you feel so inclined I can be reached,
or attacked mercilessly, at grdmilton@gmail.com.

Now, let’s proceed…

There are two main stories here.

First, Finova filed Form 15 on January 25th, 2010:

Finova's Form 15
 This step is commonly referred to as ‘going dark’, (which sounds pretty scary, right?), and I’ve
got a whole slew of details on that subject down below.

Second, Berkadia has completed is purchase of the former Capmark commercial real estate
servicing business:

Berkadia Capmark Press Release

Berkadia Commercial Mortgage Home Page

We now think it is perfectly logical to believe that Berkadia, which already owns 50% of Finova,
will soon be generating revenue/profit/income from Berkadia Commercial Mortgage (“BCM”) if it isn’t
already doing so. Thus, we want to believe that Berkadia could use Finova’s $1.7 Billion in NOL’s to
offset the tax on BCM’s income. And thus, we want to believe that Berkadia will purchase the remainder
of Finova that it does not already own, so that it may derive the full benefit of Finova’s NOL’s. We used
to think that Finova was going to be ‘merged’ with something, like NetJets, but now it looks like BCM
and Finova would make a pretty pair under the Berkadia umbrella…in my opinion, of course.

Next up is something to encourage us that we are on the right track; a quote from Berkshire
Hathaway’s most recent annual letter:

“At the end of 2009, we became a 50% owner of Berkadia Commercial Mortgage
(formerly known as Capmark)…long-term opportunities for Berkadia are significant. Our partner in this
operation is Leucadia, run by Joe Steinberg and Ian Cumming, with whom we had a terrific experience
some years back when Berkshire joined with them to purchase Finova, a troubled finance business. In
resolving that situation, Joe and Ian did far more than their share of the work, an arrangement I always
encourage. Naturally, I was delighted when they called me to partner again in the Capmark purchase.”

Berkshire Hathaway Annual Letter

AND NOW, MY CRAZY THEORY ON FINOVA’S ‘VALUE’:

Let’s run Finova’s NOL through a very simple calculation: $1.7 Billion times a typical corporate
income tax rate. Let’s run this at both 28% and 35%:

1,700,000,000 x .28 = 476,000,000

1,700,000,000 x .35 = 595,000,000

I’m going to call this number “actual dollar-for-dollar cash tax savings”, or “ACTS”. This
number represents the actual dollars that would not be outlaid to the tax man as a result of utilizing
Finova’s NOL.

Now I’ll divide my ACTS into the number of Finova common shares currently outstanding, or
about 122,000,000:

476,000,000/122,000,000 = 3.9016
 595,000,000/122,000,000 = 4.8770

Now that was easy, wasn’t it?

So my crazy opinion is that Finova, right now, today (March 11 2010), in its present condition, is
‘worth’ somewhere between $3.90 and $4.88 per share. Now naturally, that’s not what Mister
Cumming would ever pay for it. But we could encourage him to start the bidding, post haste.
We’d certainly appreciate his input.
Trouble is, we have a slight problem in that there is only one party that could actually benefit
from Finova’s NOL, and that party is Berkadia itself. It is Berkadia that already owns 50% of
Finova’s common stock, and Finova cannot be ‘sold’ to anyone else without tripping the Section
382 Change-of-Control rule:

Great Article on section 382 "poison pills"

This means that there will be a very limited, narrow, tiny market for Finova common stock in the
future, if any, because such stock essentially must stay within the hands of its ‘original’ owners. So
Berkadia, in my crazy opinion, is the only logical buyer of the remainder of Finova common, because
Berkadia would much rather use all of the NOL than just half of it. Am I right, or just crazy? What’s your
opinion?

- SCARY-SOUNDING CORPORATE TERMINOLOGY, PART II; FORM 15 AND ‘GOING DARK’:

In our last lesson a few months ago, we learned not to be immediately spooked by such
scary-sounding words as “delist” and “dissolution”. Hopefully we also learned not to reach hasty
conclusions about anything, as our Moms keep reminding us, because haste makes waste. Finova filed its
own Form 15 on January 25th, 2010. Since then, I’ve compiled a bunch of great articles on Form 15,
a.k.a. ‘going dark’. To be honest, I can count as many positives about Form 15 as I can about potential
negatives. For example, here’s a tiny little bank in Michigan that summarizes all the good reasons to file
Form 15:

Lotus Bank of Novi, MI to "Deregister" on Form 15

Here’s another great article:

The Attractions of the 'Dark Side'

And yet another one:

Gander Mountain Case Study

This one is from 2004, but the concept is exactly the same today. (You may have to do a quick, free
registration to get this article):

Sarb-Ox as a motive to go dark

Here is a FABULOUS presentation that really clarifies the whole subject of ‘Going Dark’:
 FABULOUS Presentation

Then there’s General Growth Properties, which delisted almost a year ago, on the very scary-sounding
Form 25:

GGP Delists on Form 25

…and then re-listed again just recently:

GGP Re-lists on Form 8-A

And look how well that has turned out for GGP stockholders over the last year:

Both GGP Debt and GGP Stock Soar To The Stratosphere

CENTERLINE; NEARLY IDENTICAL TO BERKADIA

Now this has to be one of the most convenient summaries I’ve found yet, from the most recent
Freddie Mac 10-K, which can be found here :

“During the twelve months ended December 31, 2009, our top three multifamily lenders, CBRE
Melody & Company, Deutsche Bank Berkshire Mortgage and Berkadia Commercial Mortgage LLC
(which acquired Capmark Finance Inc. in December 2009), …represented approximately 40% of our
multifamily purchase volume. These top lenders are among the largest mortgage loan originators in the
U.S. in the multifamily markets. …Capmark Finance Inc., which serviced 17.1% of the multifamily loans
on our consolidated balance sheet, filed for bankruptcy on October 25, 2009. On November 24, 2009, the
U.S. Bankruptcy Court for the District of Delaware gave Capmark Financial Group Inc. (“Capmark”)
approval to complete the sale of its North American servicing and mortgage banking businesses to
Berkadia Commercial Mortgage LLC (Berkadia). The sale to Berkadia, a newly formed entity owned by
Berkshire Hathaway Inc. and Leucadia National Corporation, was completed in December 2009. As of
December 31, 2009, affiliates of Centerline Holding Company serviced 5.0% of the multifamily loans on
our consolidated balance sheet. Centerline Holding Company announced that it was pursuing a
restructuring plan with its debt holders due to adverse financial conditions.”

Farkas Scoops Up Centerline, WSJ Also Mentions Berkadia

Here are the relevant excerpts from the Centerline Press Release:

“Centerline Capital Group Completes Comprehensive Restructuring…Monday March 8, 2010…

announced today it closed a series of transactions…which eliminated approximately $1.6 billion of
aggregate liabilities…and provided over $100 million of new equity…restore Centerline to financial
stability by restructuring substantially all of its outstanding debt…The transactions were structured
to preserve Centerline’s existing net operating loss (NOL) carryover, which may be considered a
potentially valuable asset since it allows current losses to be deducted against future earnings to
reduce tax liabilities.”
And here’s the whole press release:

Centerline...Completes Comprehensive Restructuring

PPA; CHAPTER 11, DELISTING, AND PROTECTING NOL’S AT THE SAME TIME:

In our quest to understand Finova’s delisting and NOL’s, we have often had to search and scour
many filings and a multitude of disparate pieces of information. Then we find ourselves spooked by
scary words like “delist” and “dissolution”. It sounds like the end-of-the-road, and can get very
confusing.

But in the case of Protective Products of America (“PPA”), however, we have all of the following
statements contained in the same press release:

“Protective Products of America, Inc. Announces Suspension of Trading on TSX… SUNRISE,

Fla., Jan 19, 2010… Protective Products of America, Inc. (TSX:PPA)…announces that it received
notice on January 14, 2010 from the Toronto Stock Exchange (the "TSX") that, effective immediately,
PPA's securities have been suspended from trading on the TSX... The notice came following PPA's
announcement on January 14, 2010 that it…had filed voluntary petitions for Chapter 11
reorganization on January 13, 2010… PPA also announced that the Court has approved an order
requiring any person or entity who presently beneficially owns or proposes to acquire at least
686,750 shares of PPA's common stock (representing approximately 4.99% of all issued and
outstanding shares)…to file with the Court and furnish to the Company advance written notice of a
proposed transfer of the Company's equity securities... Any such transfer of equity securities…will
be subject to Court approval. The Company requested these requirements to protect the Company's
net operating losses which are not being sold pursuant to the APA and will remain with the debtors'
estate.”

So here we have an illustration of a company’s shares being suspended, which sounds terminal and
tragic, while the company simultaneously makes a plan for the future of the NOL’s and the “estate”,
which sounds quite encouraging. So in this case, is the company done, or not?!?!?! Naturally, I have
no idea, but it sure makes for interesting cannon fodder, no?

Here's the full PPA press release

CONCLUSION

Well, folks, that’s about it for now, and I hope you have fun perusing these examples. As always, I
still have absolutely no idea whatsoever ‘what is going to happen with Finova’. Maybe we’ll get
skunked, and I’ll have to regroup. Maybe I’ll move to Edgartown buy a plawt of land, and raise
llamas. Maybe Mister Cumming will invite me to Amagansett for the weekend, and have his butler
Cheeves serve me a Large Italian Cold cut (hold the oil). The sandwich will be a symbolic peace
offering, so I will know that Mister Cumming welcomes me, and my inquiries, with open arms.
 Now, once he’s got me all lubed up with Capicola, Sopressata, and Cold Calamari Salad, as well
as some of his Fine Pinot Noir, I just might be amenable to an (minimum) offer of Two Dollars and
Fifty Cents per share for my Finova common. How about you? I’m sure he has plenty of open seats
at his table...

-GD Hawaya

grdmilton@gmail.com