Item 1.01
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Entry into a Material Definitive Agreement.
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On October 2, 2018, Apollo Commercial Real Estate Finance, Inc. (the Company) entered into an underwriting agreement (the
Underwriting Agreement), by and among the Company, ACREFI Management, LLC, the Companys external manager (the Manager), and Goldman Sachs & Co. LLC, Deutsche Bank Securities Inc., and J.P. Morgan Securities
LLC, as representatives of the several underwriters named therein (the Underwriters). Pursuant to the terms of the Underwriting Agreement, the Company agreed to sell, and the Underwriters agreed to purchase, subject to the terms and
conditions set forth in the Underwriting Agreement, $200.0 million principal amount of the Companys 5.375% Convertible Senior Notes due 2023 (the Notes). In addition, the Company granted to the Underwriters the option to
purchase, within a period of 13 days beginning on, and including, the date the Notes are first issued, up to an additional $30.0 million principal amount of Notes. The Underwriters elected to exercise this option in full on October 3,
2018. The Underwriting Agreement contains customary representations, warranties and agreements of the Company, conditions to closing, indemnification rights and obligations of the parties and termination provisions.
On October 5, 2018, the Company issued $230.0 million aggregate principal amount of the Notes, which includes $30.0 million
aggregate principal amount of the Notes issued pursuant to the underwriters exercise of their option to purchase additional Notes. The public offering generated net proceeds of approximately $223.7 million, after deducting the
underwriting discount and estimated offering expenses.
The Notes were issued pursuant to an indenture (the Base Indenture),
dated as of March 17, 2014, between the Company and Wells Fargo Bank, National Association, as trustee (the Trustee), as supplemented by the Third Supplemental Indenture, dated as of October 5, 2018 (the Supplemental
Indenture and, together with the Base Indenture, the Indenture), with respect to the Notes.
The Notes bear interest at
a rate of 5.375% per year, payable semiannually in arrears on April 15 and October 15 of each year, beginning on April 15, 2019. The Notes will mature on October 15, 2023, unless earlier repurchased, redeemed or converted. Upon
conversion, holders of the Notes will receive cash, shares of common stock of the Company, par value $0.01 per share (Common Stock), or a combination of cash and shares of Common Stock, at the Companys election. If the Company
undergoes a fundamental change (as defined in the Indenture), subject to certain conditions, holders of the Notes may require the Company to repurchase for cash all or part of such holders Notes. The fundamental change repurchase
price for the Notes generally will be equal to 100% of the principal amount of the Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date. Holders may convert all or a portion of their
Notes at any time prior to the close of business on the second scheduled trading day immediately preceding the maturity date, unless the Notes have been previously repurchased or redeemed by the Company.
Any conversion of Notes into shares of Common Stock will be subject to certain ownership limitations (as more fully described in the
Indenture). The initial conversion rate for each $1,000 aggregate principal amount of the Notes is 48.7187 shares of Common Stock, equivalent to a conversion price of approximately $20.53 per share of Common Stock, which is an approximately 10%
premium to the closing per share price of the Common Stock on October 2, 2018. The conversion rate is subject to adjustment in certain circumstances.
The Company may not redeem the Notes prior to the maturity date, except to the extent, and only to the extent, necessary to preserve the
Companys status as a real estate investment trust (REIT). If the Company determines that redeeming the Notes is necessary to preserve its status as a REIT, then the Company may redeem all or part of the Notes at a cash redemption
price equal to the principal amount of the Notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date.
If an event of default (as defined in the Indenture) occurs and is continuing, the Trustee by notice to the Company, or the holders of at
least 25% in principal amount of the Notes then outstanding by written notice to the Company and the Trustee, may, and the Trustee at the request of such holders shall, declare 100% of the principal of and accrued and unpaid interest, if any, on all
the Notes to be due and payable. In the case of an event of default arising out of certain events of bankruptcy, insolvency or reorganization (as set forth in the Indenture), 100% of the principal of and accrued and unpaid interest on all the Notes
will automatically become due and payable.