Western Asset Mortgage Capital Corporation Announces Fourth Quarter and Full Year 2021 Results
Conference Call and Webcast Scheduled for Tomorrow, Thursday, March 3, 2022 at 11:00 a.m. Eastern Time/8:00 a.m. Pacific Time
PASADENA, Calif.–(BUSINESS WIRE)–Western Asset Mortgage Capital Corporation (the “Company” or “WMC”) (NYSE: WMC) today reported its results for the fourth quarter and the year ended December 31, 2021.
BUSINESS UPDATE
In December 2021, the Company announced its intention to focus its investment strategy on residential real estate related investments, including but not limited to non-qualified mortgage loans, non-agency RMBS, and other related investments. The portfolio transition is expected to be accomplished over 12-18 months. The Company plans to transition out of the commercial investments in its portfolio, though it may from time to time make investments in commercial assets on an opportunistic basis.
- For the three months and twelve months ended December 31, 2021, the Company acquired $184.5 million and $427.8 million of residential whole loans, respectively.
- The Company also sold $27.5 million of Non-Agency CMBS investments during the fourth quarter.
- In February 2022, the Company and other investors sold the unencumbered hotel property they foreclosed on in 2021. The Company estimates that its share of the gain on sale of the property based on December 31, 2021 carrying value, will be approximately $6.7 million.
The Manager is voluntarily waiving 25% of its management fee solely for calendar year 2022 in order to support the earnings potential of the Company and its transition to a residential focused investment portfolio.
In December 2021, the Company extended its share repurchase program as authorized by its Board of Directors. Under the extended program, the Company is permitted to repurchase up to 3,000,000 shares of its common stock through December 31, 2023.
- In the fourth quarter of 2021, the Company repurchased 479,808 shares of its common stock at an average price of $2.27.
The Company continued its efforts to strengthen its balance sheet through the following transactions:
- In the fourth quarter of 2021, the Company repurchased $8.0 million aggregate principal amount of its 6.75% Convertible Senior Unsecured Notes due in 2022 at an approximate 1% premium to par value, plus accrued interest.
- In November, the Company amended its Residential Whole Loan Facility. The amended facility has a 12-month term, a stated capacity of $500 million, and bears an interest rate of LIBOR plus 2.00%, with a LIBOR floor of 0.25%.
- In February 2022, the Company completed its third securitization of $432.0 million of residential whole loans, securing $398.9 million of long-term fixed-rate financing at a weighted average interest rate of 3.1%.
FOURTH QUARTER FINANCIAL 2021 RESULTS
- GAAP book value per share of $3.20.
- Economic book value5 per share of $3.03.
- GAAP Net loss attributable to common shareholders and participating securities of $12.1 million, or $0.20 per share
- Distributable Earnings1 of $908 thousand, or $0.01 per basic and diluted share.
- Economic return1,2 on book value was a negative 5.5% for the quarter.
- 0.96% annualized net interest margin1,3,4 on our investment portfolio.
- 3.8x recourse leverage as of December 31, 2021.
- On December 21, 2021, we declared a fourth quarter common dividend of $0.06 per share.
FULL YEAR 2021 FINANCIAL RESULTS
- GAAP Net loss attributable to common shareholders and participating securities of $49.0 million, or $0.81 per share.
- Distributable earnings1 of $13.1 million, or $0.22 per basic and diluted share.
- Economic return on book value1,2 was negative 18.1% for the year.
- 1.60% annualized net interest margin1,3,4 on our investment portfolio.
- Declared quarterly common dividends for a total annual common dividend of $0.24 per share.
| 1. |
Non – GAAP measure. |
| 2. |
Economic return is calculated by taking the sum of: (i) the total dividends declared; and (ii) the change in book value during the period and dividing by the beginning book value. |
| 3. |
Includes interest-only securities accounted for as derivatives and the cost of interest rate swaps. |
| 4. |
Excludes the consolidation of VIE trusts required under GAAP. |
| 5. |
Economic book value is a non-GAAP financial measure. Refer to page 16 of this press release for the reconciliation of GAAP book value to non-GAAP economic book value. |
MANAGEMENT COMMENTARY
“Our fourth quarter and full year financial results reflect the challenges of ongoing interest rate volatility and fluctuating asset values, combined with the impact of transitioning our primary investment focus towards the residential real estate sector and away from commercial real estate,” said Bonnie Wongtrakool, Chief Executive Officer of the Company. “During the fourth quarter, we continued to implement this strategy by acquiring approximately $185 million of residential whole loans, extending the maturity of our residential whole loan facility, and disposing of $27 million of Non-Agency CMBS investments. In addition, we repurchased an additional $8.0 million of our 2022 Notes and bought back approximately 479,808 shares of our common stock at a significant discount to book value.”
“Our distributable earnings were $908 thousand, or $0.01 per share, in the fourth quarter, down $2.9 million from the third quarter. Our financial results were negatively impacted by a number of factors, including a full quarter’s impact of lower net interest income as we exited $157 million of commercial real estate investments in the third quarter, continued elevated prepayments on our residential whole loan portfolio and the placement of one investment in our Non-Agency CMBS portfolio on non-accrual status. This resulted in a GAAP net loss attributable to common shareholders and participating securities of $12.1 million, or $0.20 per share, and a decrease in our GAAP book value per share of 7.2% from the third quarter,” Ms. Wongtrakool concluded.
Greg Handler, Chief Investment Officer of the Company, added, “We continued to reposition our portfolio during the quarter, adding non-qualified residential mortgages and liquidating some of our commercial holdings. We expect the transition to progress over the next twelve to eighteen months. As we redeploy capital, we believe the earnings power of the portfolio will improve.”
“In February, we completed our third securitization of residential whole loan assets, enabling us to finance these assets with longer-term fixed rate financing at attractive levels. In February, we sold the unencumbered hotel property that we and other investors acquired last year through foreclosure, and our share of the gain on sale is estimated to be $6.7 million, based on December 31, 2021 carrying values. However, it is taking longer for some of our other commercial real estate investments to recover in value. We expect these near-term challenges will eventually subside as the economy further improves and these properties begin to return to more normal levels of operations, but whether and to what extent these positions recover remains uncertain.”
“While the fourth quarter was clearly a difficult quarter, we continue to work diligently on reaching positive resolutions on our challenged investments as well as positioning the remainder of our portfolio for potential future appreciation with the goals of generating sustainable earnings that support an attractive dividend and protecting and enhancing value for the benefit of our shareholders,” Mr. Handler concluded.
2021 Quarterly Results
The below table reflects a summary of our operating results (dollars in thousands, except per share data):
|
|
For the Three Months Ended |
||||||||||
|
GAAP Results |
December 31, 2021 |
|
September 30, 2021 |
|
June 30, 2021 |
|
March 31, 2021 |
||||
|
|
|
|
|
|
|
|
|
||||
|
Net Interest Income |
$ 4,628 |
|
|
$ 7,163 |
|
|
$ 6,590 |
|
|
$ 9,248 |
|
|
Other Income (Loss): |
|
|
|
|
|
|
|
||||
|
Realized gain (loss), net |
(3,560 |
) |
|
(1,526 |
) |
|
(116 |
) |
|
(5,725 |
) |
|
Unrealized gain (loss), net |
(7,120 |
) |
|
(6,003 |
) |
|
(42,318 |
) |
|
9,050 |
|
|
Gain (loss) on derivative instruments, net |
(167 |
) |
|
515 |
|
|
175 |
|
|
26 |
|
|
Other, net |
41 |
|
|
277 |
|
|
200 |
|
|
(28 |
) |
|
Other Income (loss) |
(10,806 |
) |
|
(6,737 |
) |
|
(42,059 |
) |
|
3,323 |
|
|
Total Expenses |
6,411 |
|
|
5,128 |
|
|
4,591 |
|
|
4,518 |
|
|
Income (loss) before income taxes |
(12,589 |
) |
|
(4,702 |
) |
|
(40,060 |
) |
|
8,053 |
|
|
Income tax provision (benefit) |
118 |
|
|
(218 |
) |
|
101 |
|
|
98 |
|
|
Net income (loss) |
(12,707 |
) |
|
(4,484 |
) |
|
(40,161 |
) |
|
7,955 |
|
|
Net income attributable to non-controlling interest |
(645 |
) |
|
(271 |
) |
|
2 |
|
|
2 |
|
|
Net income (loss) attributable to common stockholders and participating securities |
$ (12,062 |
) |
|
$ (4,213 |
) |
|
$ (40,163 |
) |
|
$ 7,953 |
|
|
Net income (loss) per Common Share – Basic/Diluted |
$ (0.20 |
) |
|
$ (0.07 |
) |
|
$ (0.66 |
) |
|
$ 0.13 |
|
|
Non-GAAP Results |
|
|
|
|
|
|
|
||||
|
Distributable earnings (1) |
$ 908 |
|
|
$ 3,792 |
|
|
$ 2,761 |
|
|
$ 6,143 |
|
|
Distributable earnings per Common Share – Basic/Diluted |
$ 0.01 |
|
|
$ 0.06 |
|
|
$ 0.05 |
|
|
$ 0.10 |
|
|
Weighted average yield(2)(4) |
4.02 |
% |
|
4.93 |
% |
|
4.72 |
% |
|
5.55 |
% |
|
Effective cost of funds(3)(4) |
3.65 |
% |
|
3.77 |
% |
|
3.94 |
% |
|
4.10 |
% |
|
Annualized net interest margin(2)(3)(4) |
0.96 |
% |
|
1.81 |
% |
|
1.51 |
% |
|
2.19 |
% |
| (1) |
For a reconciliation of GAAP Income to Distributable Earnings, please refer to the Reconciliation of Distributable Earnings at the end of this press release. |
| (2) |
Includes interest-only securities accounted for as derivatives. |
| (3) |
Includes the net amount paid, including accrued amounts for interest rate swaps and premium amortization for interest rate swaps during the periods. |
| (4) |
Excludes the consolidation of VIE trusts required under GAAP. |
Investment Portfolio
Investment Activity
As of December 31, 2021, the Company owned an aggregate investment portfolio with a fair market value totaling $2.7 billion. The following table presents information regarding the Company’s investment portfolio as of December 31, 2021 (dollars in thousands):
|
Investment Type |
|
Balance at December 31, 2020 |
|
Purchases |
|
Loan Modification/Capitalized Interest |
|
Principal Payments and Basis Recovery |
|
Proceeds from Sales |
|
Transfers to REO |
|
Realized Gain/(Loss) |
|
Unrealized Gain/(loss) |
|
Premium and discount amortization, net |
|
Balance at December 31, 2021 |
|
Agency RMBS and Agency RMBS IOs |
|
$ 1,708 |
|
$ — |
|
N/A |
|
$ (331) |
|
$ — |
|
N/A |
|
$ — |
|
$ (205) |
|
$ — |
|
$ 1,172 |
|
Non-Agency RMBS |
|
25,381 |
|
— |
|
N/A |
|
(1,148) |
|
— |
|
N/A |
|
— |
|
3,543 |
|
(7) |
|
27,769 |
|
Non-Agency CMBS |
|
164,081 |
|
— |
|
N/A |
|
(15,181) |
|
(27,488) |
|
N/A |
|
(9,266) |
|
(13,323) |
|
6,535 |
|
105,358 |
|
Other securities(1) |
|
48,754 |
|
— |
|
N/A |
|
— |
|
— |
|
N/A |
|
— |
|
4,468 |
|
(1,574) |
|
51,648 |
|
Total MBS and other securities |
|
239,924 |
|
— |
|
N/A |
|
(16,660) |
|
(27,488) |
|
N/A |
|
(9,266) |
|
(5,517) |
|
4,954 |
|
185,947 |
|
Residential Whole Loans |
|
1,008,782 |
|
427,848 |
|
485 |
|
(406,688) |
|
— |
|
— |
|
— |
|
2,850 |
|
(9,775) |
|
1,023,502 |
|
Residential Bridge Loans |
|
13,916 |
|
— |
|
— |
|
(8,437) |
|
— |
|
(751) |
|
(206) |
|
928 |
|
(22) |
|
5,428 |
|
Commercial Loans |
|
310,523 |
|
— |
|
— |
|
(103,285) |
|
— |
|
(30,000) |
|
— |
|
(46,813) |
|
147 |
|
130,572 |
|
Securitized commercial loans |
|
1,605,335 |
|
— |
|
— |
|
(354,202) |
|
— |
|
— |
|
— |
|
79,972 |
|
24,703 |
|
1,355,808 |
|
Total Investments |
|
$ 3,178,480 |
|
$ 427,848 |
|
$ 485 |
|
$ (889,272) |
|
$ (27,488) |
|
$ (30,751) |
|
$ (9,472) |
|
$ 31,420 |
|
$ 20,007 |
|
$ 2,701,257 |
Portfolio Characteristics
Residential Real Estate Investments
The Company’s focus on residential real estate related investments will include but is not limited to non-qualified residential whole loans (“Non-QM Loans”), non-agency RMBS, and other related assets The Company believes this focus will allow it to address attractive market opportunities.
Residential Whole Loans
The Company’s Residential Whole Loans generally have low loan-to-value ratios (“LTV’s”) and comprise 2,355 Non-QM Loans with adjustable-rate mortgages and six investor fixed-rate mortgages. The following table presents certain information about our Residential Whole-Loans investment portfolio as of December 31, 2021 (dollars in thousands):
|
|
|
|
|
|
|
Weighted Average |
||||||||
|
Current Coupon Rate |
|
Number of Loans |
|
Principal Balance |
|
Original LTV |
|
Original FICO Score(1) |
|
Expected Life (years) (2) |
|
Contractual Maturity (years) |
|
Coupon Rate |
|
2.01% – 3.00% |
|
27 |
|
$ 15,640 |
|
65.1 % |
|
757 |
|
5.3 |
|
28.8 |
|
2.8 % |
|
3.01% – 4.00% |
|
496 |
|
244,022 |
|
63.7 % |
|
756 |
|
3.3 |
|
28.0 |
|
3.7 % |
|
4.01% – 5.00% |
|
1,051 |
|
413,451 |
|
65.1 % |
|
747 |
|
2.9 |
|
28.2 |
|
4.7 % |
|
5.01% – 6.00% |
|
757 |
|
305,344 |
|
64.9 % |
|
738 |
|
3.0 |
|
26.8 |
|
5.4 % |
|
6.01% – 7.00% |
|
28 |
|
10,181 |
|
67.9 % |
|
721 |
|
3.1 |
|
25.8 |
|
6.3 % |
|
7.01% – 8.00% |
|
2 |
|
505 |
|
73.2 % |
|
753 |
|
4.5 |
|
26.8 |
|
7.1 % |
|
Total |
|
2,361 |
|
$ 989,143 |
|
64.8 % |
|
746 |
|
3.1 |
|
27.7 |
|
4.6 % |
| (1) |
The original FICO score is not available for 230 loans with a principal balance of approximately $74.3 million at December 31, 2021. We have excluded these loans from the weighted average computations. |
The following table presents the aging of the Residential Whole Loans as of December 31, 2021 (dollars in thousands):
|
|
|
Residential Whole Loans |
||||
|
|
|
No of Loans |
|
Principal |
|
Fair Value |
|
Current |
|
2,329 |
|
$ 971,790 |
|
$ 1,006,271 |
|
1-30 days |
|
9 |
|
3,146 |
|
3,285 |
|
31-60 days |
|
— |
|
— |
|
— |
|
61-90 days |
|
3 |
|
1,993 |
|
1,989 |
|
90+ days |
|
20 |
|
12,214 |
|
11,957 |
|
Total |
|
2,361 |
|
$ 989,143 |
|
$ 1,023,502 |
Non-Agency RMBS
The following table presents the fair value and weighted average purchase price for each of our Non-agency RMBS categories, including IOs accounted for as derivatives, together with certain of their respective underlying loan collateral attributes and current performance metrics as of December 31, 2021 (fair value dollars in thousands):
|
|
|
|
|
Weighted Average |
||||||||||
|
Category |
|
Fair Value |
|
Purchase Price |
|
Life (Years) |
|
Original LTV |
|
Original FICO |
|
60+ Day Delinquent |
|
6-Month CPR |
|
Prime |
|
$ 10,388 |
|
$ 72.49 |
|
4.0 |
|
59.0 % |
|
769 |
|
4.0 % |
|
49.7 % |
|
Alt-A |
|
17,381 |
|
51.48 |
|
11.3 |
|
80.7 % |
|
664 |
|
20.3 % |
|
11.8 % |
|
Total |
|
$ 27,769 |
|
$ 59.34 |
|
8.6 |
|
72.6 % |
|
703 |
|
14.2 % |
|
26.0 % |
Commercial Real Estate Investments
With The Company’s new focus on residential real estate related investments, it plans to transition out of the commercial investments in its portfolio over the next 12-18 months. This section provides information about our commercial real estate investments as of December 31, 2021.
Non-Agency CMBS
The following table presents certain characteristics of our Non-Agency CMBS portfolio as of December 31, 2021 (dollars in thousands):
|
|
|
|
|
Principal |
|
|
|
Weighted Average |
||
|
Type |
|
Vintage |
|
Balance |
|
Fair Value |
|
Life (Years) |
|
Original LTV |
|
Conduit: |
|
|
|
|
|
|
|
|
|
0 |
|
|
|
2005-2009 |
|
$ 180 |
|
$ 175 |
|
1.9 |
|
83.7 % |
|
|
|
2010-2020 |
|
78,776 |
|
21,155 |
|
5.6 |
|
62.8 % |
|
|
|
|
|
78,956 |
|
21,330 |
|
5.5 |
|
62.9 % |
|
Single Asset: |
|
|
|
|
|
|
|
|
|
|
|
|
|
2010-2020 |
|
100,663 |
|
84,028 |
|
1.8 |
|
65.4 % |
|
Total |
|
|
|
$ 179,619 |
|
$ 105,358 |
|
2.5 |
|
64.9 % |
The Company’s Commercial Loans and Non-Agency CMBS portfolios are performing according to expectations under the current pandemic conditions. The Company believes there is a reasonable likelihood that many of the delinquent loans that serve as collateral for the Non-Agency CMBS will return to performing status in the coming months as the economy continues to reopen. However, there is no assurance that this will be the case.
Commercial Loans
The following table presents our commercial loan investments as of December 31, 2021 (dollars in thousands):
|
Loan |
Loan Type |
Principal Balance |
Fair Value |
Original LTV |
Interest Rate |
Maturity Date |
Extension Option |
Collateral |
Geographic Location |
|
CRE 3 |
Interest-Only Mezzanine loan |
$ 90,000 |
$ 29,113 |
58% |
1-Month LIBOR plus 9.25% |
6/29/2021 |
None (1) |
Entertainment and Retail |
NJ |
|
CRE 4 |
Interest-Only First Mortgage |
38,367 |
38,267 |
63% |
1-Month LIBOR plus 3.02% |
8/6/2022 |
One-Year Extension |
Retail |
CT |
|
CRE 5 |
Interest-Only First Mortgage |
24,535 |
24,212 |
62% |
1-Month LIBOR plus 3.75% |
11/6/2022 |
Two One-Year Extensions |
Hotel |
NY |
|
CRE 6 |
Interest-Only First Mortgage |
13,207 |
13,033 |
62% |
1-Month LIBOR plus 3.75% |
11/6/2022 |
Two One-Year Extensions |
Hotel |
CA |
|
CRE 7 |
Interest-Only First Mortgage |
7,259 |
7,163 |
62% |
1-Month LIBOR plus 3.75% |
11/6/2022 |
Two One-Year Extensions |
Hotel |
IL, FL |
|
CRE 8 |
Interest-Only First Mortgage |
4,429 |
4,422 |
79% |
1-Month LIBOR plus 4.85% |
12/6/2022 |
None |
Assisted Living Facilities |
FL |
|
SBC 3 |
Interest-Only First Mortgage |
14,362 |
14,362 |
49% |
One-Month LIBOR plus 4.10% |
7/6/2022 |
None |
Nursing Facilities |
CT |
|
|
|
$ 192,159 |
$ 130,572 |
|
|
|
|
|
|
| (1) |
CRE 3 is in default and not eligible for extension. |
Non-Performing Commercial Loan
The COVID-19 pandemic has adversely impacted a broad range of industries in which our commercial loan borrowers operate and could impair their ability to fulfill their financial obligations to us. The more severely impacted commercial real estate markets were the retail and hospitality industries. Some of our other commercial real estate investments in the retail and hospitality industries are taking longer to recover. All but the one loan of the Company’s remaining Commercial Loans discussed below remains current.
CRE 3 Loan
As of December 31, 2021, the CRE 3 junior mezzanine loan with an outstanding principal balance of $90.0 million secured by a retail facility was non-performing and past its maturity date of June 29, 2021. We were receiving interest payments on this loan from a reserve that was exhausted in May 2021. During the second quarter of 2021, the fair value of the loan declined significantly. We are currently in discussions with the borrower and certain other lenders regarding alternatives to address the situation, which might include modifications of loan terms, deferral of payments, and the funding of new advances. There can be no assurance that these discussions will result in an outcome in which we would be repaid any principal amount of the loan, and we may suffer further declines in fair value for this mezzanine investment. For the twelve months ended December 31, 2021, we suffered a decline of $51.2 million in the fair value of this investment. We could experience a total loss of our investment under various scenarios, which at current levels would result in a $29.1 million an additional reduction in the Company’s book value.
Commercial Real Estate Owned
In August 2021, the Company together with the other holders of the loan, foreclosed on the property through a SPE formed for the purpose of holding the property. The sale of the Property closed on February 14, 2022 for $55.9 million. The Company and the other investors fully recovered their aggregate initial investment of $42.0 million. The Company estimates it will recognize a gain on sale of approximately $6.7 million, based on the December 31, 2021 carrying value.
Securitized Commercial Loans
On September 15, 2021, the commercial loan that served as collateral for the RETL 2019-RVP securitization was paid in full by the borrower and the RETL HRR bond with an outstanding principal amount of $45.3 million held in WMC RETL LLC, a wholly-owned subsidiary of the Company, was paid off. Accordingly, the RETL 2019 Trust is no longer consolidated into the Company’s financial statements.
Portfolio Financing and Hedging
Financing
During the quarter the Company continued to look for ways to expand and diversify its financing sources, especially those sources that provide an alternative to short-term repurchase agreements with daily margin requirements.
Repurchase Agreements
At December 31, 2021, the Company had outstanding borrowings under five of its master repurchase agreements. The following table summarizes certain characteristics of its repurchase agreements at December 31, 2021 (dollars in thousands):
|
Securities Pledged |
|
Repurchase Agreement Borrowings |
|
Weighted Average Interest Rate on Borrowings Outstanding at end of period |
|
Weighted Average Remaining Maturity (days) |
|
Short Term Borrowings: |
|
|
|
|
|
|
|
Agency RMBS |
|
$ 976 |
|
1.02 % |
|
58 |
|
Non-Agency RMBS(1) |
|
38,354 |
|
2.94 % |
|
4 |
|
Residential Whole Loans(2) |
|
1,439 |
|
2.57 % |
|
5 |
|
Residential Bridge Loans(2) |
|
4,368 |
|
2.61 % |
|
5 |
|
Commercial Loans(2) |
|
6,463 |
|
3.20 % |
|
5 |
|
Other securities |
|
2,457 |
|
3.50 % |
|
18 |
|
Total short term borrowings |
|
54,057 |
|
2.92 % |
|
6 |
|
Long Term Borrowings: |
|
|
|
|
|
|
|
Non-Agency CMBS and Non-Agency RMBS Facility |
|
|
|
|
|
|
|
Non-Agency CMBS(1) |
|
59,802 |
|
2.14 % |
|
125 |
|
Non-Agency RMBS |
|
15,632 |
|
2.14 % |
|
125 |
|
Other Securities |
|
27,506 |
|
2.22 % |
|
125 |
|
Subtotal |
|
102,940 |
|
2.16 % |
|
125 |
|
Residential Whole Loan Facility |
|
|
|
|
|
|
|
Residential Whole Loans(2) |
|
396,531 |
|
2.25 % |
|
308 |
|
Commercial Whole Loan Facility |
|
|
|
|
|
|
|
Commercial Loans |
|
63,661 |
|
2.27 % |
|
268 |
|
Total long term borrowings |
|
563,132 |
|
2.24 % |
|
270 |
|
Repurchase agreements borrowings |
|
$ 617,189 |
|
2.30 % |
|
247 |
| (1) |
Includes repurchase agreement borrowings on securities eliminated upon VIE consolidation. |
| (2) |
Repurchase agreement borrowings on loans owned are through trust certificates. The trust certificates are eliminated in consolidation. |
Residential Whole Loan Facility
On November 5, 2021, the Company entered into an amendment of its Residential Whole Loan Facility. The amended facility has a stated capacity of $500 million and bears an interest rate of one-month LIBOR plus 2.00%, with a LIBOR floor of 0.25%. The facility is available to finance five types of residential mortgages: Non-Agency mortgage loans, Non-QM loans, investor loans, re-performing, and non-performing loans. The advance rates differ by type of loan, but for performing Non-QM loans, the advance rate is 90% of the outstanding principal amount. The facility matures on November 4, 2022. The facility is a mark-to- market margin facility; however, the margin requirement is only triggered if the fair value of the collateral declines below outstanding principal amount.
Non-Agency CMBS and Non-Agency RMBS Facility
On May 5, 2021, the Company amended its Non-Agency CMBS and Non-Agency RMBS financing facility to, among other things, extend the facility for an additional 12 months and reduce the interest rate. The amended facility has improved advance rates and bears interest at a rate of three-month LIBOR plus 2.00%. The facility is not subject to daily margin calls; however, a margin requirement is triggered when the loan to value ratio surpasses a certain threshold (the “LTV Trigger”), calculated on a weighted average basis per asset type on a portfolio level. The LTV Trigger is 75% RMBS investments and 70% for CMBS investments.
Commercial Whole Loan Facility
On May 5, 2021, the Company amended its $100 million Commercial Whole Loan Facility to, among other things, convert the term to a 12-month facility with up to one 12-month extension option, subject to the lender’s consent.
Repurchase Agreements Financial Metrics
Certain of the Company’s repurchase agreements provide the counterparty with the right to terminate the agreement and accelerate amounts due under the associated agreement if we do not maintain certain financial metrics. Although specific to each financing arrangement, typical financial metrics include minimum equity and liquidity requirements, leverage ratios, and performance triggers. In addition, some of the financing arrangements contain cross-default features, whereby default under an agreement with one lender simultaneously causes default under agreements with other lenders. We complied with the terms of such financial tests as of December 31, 2021.
Convertible Senior Unsecured Notes
In 2021, the Company reduced its total convertible senior unsecured debt by $51.0 million. In September 2021, the Company issued $86.3 million of new 6.75% Convertible Senior Unsecured Notes with a maturity of September 2024, retiring $100.3 million of its Convertible Senior Unsecured Notes that mature in October 2022.
6.75% Convertible Senior Unsecured Notes due 2022 (“2022 Notes”)
As of December 31, 2021, we had $37.7 million aggregate principal amount outstanding of the 2022 Notes. The 2022 Notes mature on October 1, 2022, unless earlier converted, redeemed by the holders pursuant to their terms or repurchased by us, and are not redeemable by us except during the final three months prior to maturity.
6.75% Convertible Senior Unsecured Notes due 2024 (“2024 Notes”)
As of December 31, 2021, we had $86.3 million aggregate principal amount outstanding of the 2024 Notes.
Contacts
Investor Relations Contact:
Larry Clark
Financial Profiles, Inc.
(310) 622-8223
lclark@finprofiles.com
Media Contact:
Tricia Ross
Financial Profiles, Inc.
(310) 622-8226
tross@finprofiles.com