AG Mortgage Investment Trust, Inc. (NYSE: MITT) (the “Company”)
announced today the following updates with respect to its business
operations.
Bid Terms Acknowledgment Letter
On May 1, 2020, BCAT 2020-23TT (the “Seller”), a subsidiary of
the Company, entered into a Bid Terms Acknowledgment Letter (the
“Letter Agreement”) with an unaffiliated third party (the
“Purchaser”), evidencing the Purchaser’s intent to purchase, and
the Seller's intent to sell, the pool of mortgage loans set forth
therein (the “Loans”) having an approximate unpaid principal
balance of approximately $469 million (the “Loan Sale”) for a
purchase price of approximately $383 million. The Loan Sale is
subject to the terms and conditions set forth in the Letter
Agreement and the entry by the Seller, the Company, and an
affiliate of the Purchaser into a Mortgage Loan Purchase and Sale
Agreement (the “MLPA”). The principal terms and conditions set
forth in the Letter Agreement for the Loan Sale are summarized
below.
The Loans will be sold on a whole loan, servicing-released basis
and shall be subject to certain trade stipulations, including
customary closing conditions to be set forth in the MLPA and the
Purchaser’s ability to obtain financing for the Loan Sale within
certain specified parameters. The purchase price of the Loans is
subject to re-pricing based on the confirmatory due diligence of an
affiliate of the Purchaser and the mutual agreement of the Seller
and Purchaser. The Loans are being sold on an “as is, where is”
basis, without representation or warranty, other than certain
representations to be set forth in the MLPA. The Letter Agreement
provides that the parties shall use their commercially reasonable
efforts to consummate the Loan Sale on May 22, 2020, or such later
date as may be agreed between an affiliate of the Purchaser and the
Seller.
The Company cannot provide any assurance that the terms and
conditions of the Letter Agreement will be met, that the MLPA will
be executed, or that the Loan Sale will occur on the terms or
timing that the Company expects, if at all. If the Loan Sale is not
consummated or is not consummated on the terms the Company expects,
the Company may be unable to use the proceeds of the Loan Sale to
reduce the balances under its repurchase financing facilities with
certain Participating Counterparties (defined below), and any
alternative disposition of the collateral could be on terms that
are less desirable than those of the proposed Loan Sale.
Portfolio Update
The COVID-19 pandemic's effects on financial markets have
negatively impacted and continue to negatively impact the Company's
business. The Company has experienced declines in the value of its
target assets, as well as adverse developments with respect to the
cost and terms of financing available to it. In light of the
ongoing COVID-19 pandemic and related market conditions, the
Company has taken various actions in an effort to prudently manage
the Company’s portfolio through unprecedented market volatility.
These actions include declining to meet margin calls, entering into
two Forbearance Agreements with the Participating Counterparties
(as each term is defined below), the sale of various assets, and
the reduction of the balances under the Company’s repurchase
financing facilities.
As previously disclosed on March 23, 2020, the Company notified
its financing counterparties that it was not in a position to fund
the margin calls it received on March 23, 2020, and that the
Company did not expect to be in a position to fund the anticipated
volume of future margin calls under its financing arrangements in
the near term as a result of market disruptions created by the
COVID-19 pandemic. Since March 23, 2020, the Company and several of
its subsidiaries have received from several financing
counterparties margin call notices, notifications of alleged events
of default and deficiency notices. On April 10, 2020, the Company
entered into a Forbearance Agreement (the “First Forbearance
Agreement”) with each of the following financing counterparties:
Bank of America, N.A., BofA Securities, Inc., Credit Suisse
Securities (USA) LLC, Credit Suisse AG, Credit Suisse
International, Barclays Capital Inc., Barclays Bank PLC, Société
Général S.A., Wells Fargo Bank, National Association, Wells Fargo
Securities, LLC, Goldman Sachs Bank USA and Goldman Sachs & Co.
LLC (each, a “Participating Counterparty,” and collectively, the
“Participating Counterparties”). Upon the expiration of the First
Forbearance Agreement on April 27, 2020, the Company entered into a
second Forbearance Agreement (together with the First Forbearance
Agreement, the “Forbearance Agreements”) with the Participating
Counterparties, pursuant to which each Participating Counterparty
agreed to continue to forbear from exercising any of its rights and
remedies in respect of events of default and any and all other
defaults under the applicable repurchase agreement with the Company
until the earlier of (a) 4:30 p.m. Eastern Daylight Time on June 1,
2020 or (b) the occurrence and continuance of a Triggering Event
(as defined).
As previously disclosed, in connection with the Forbearance
Agreements, on April 13, 2020, the Company received a subordinated
loan of $10 million from AG REIT Management, LLC, its external
manager (the “Manager”), due on March 31, 2021. On April 27, 2020,
the Company received an additional subordinated loan of $10 million
from the Manager due on July 27, 2020.
The Company has continued taking steps to manage and de-lever
its portfolio and generate liquidity. In particular, since March
23, 2020, the Company has sold residential and commercial mortgage
assets generating proceeds of approximately $620 million to date
(exclusive of the proposed Loan Sale described above), comprised of
approximately $330 million of residential investments, $250 million
of commercial investments and $40 million of Agency MBS
collateralized mortgage obligations.
The Company is engaged in negotiations with certain of its
financing counterparties with regard to consolidating certain of
its repurchase financing arrangements with a smaller number of
existing counterparties. The Company is also engaged in
negotiations with non-Participating Counterparties to settle
recourse financing obligations totaling approximately $90 million,
net of cash posted as collateral.
The Company has elected to provide the following updates as of
the close of business on April 30, 2020. The below estimates are
limited to information that has been received by the Company from
its financing counterparties with respect to sales of portfolio
assets as of April 30, 2020 and is subject to change.
- The Company had an investment portfolio of approximately $1.4
billion1,2 as of April 30, 2020, consisting of 83% residential
investments, 16% commercial investments and 1% agency
derivatives.
- The Company’s debt obligations as of April 30, 2020 were
approximately $1.1 billion3, net of cash posted as collateral to
its financing counterparties, of which approximately $690 million3
are recourse repurchase obligations. Of the recourse repurchase
obligations, approximately $600 million3 is included under the
Forbearance Agreements with Participating Counterparties.
- If the Loan Sale described above were completed as of April 30,
2020, and without any potential reduction based upon the
Purchaser’s due diligence, the Company’s investment portfolio would
decrease to approximately $1 billion1,2 and the Company’s recourse
repurchase obligations net of cash posted as collateral would be
reduced to approximately $300 million4.
- The Company’s book value per share5 as of April 30, 2020 is
estimated to be in the range of $1.80 to $1.90.
The financial information set forth above reflects the Company’s
estimates based on information currently available to management.
These estimates are not a comprehensive statement or estimate of
the Company’s financial results or financial condition. These
estimates should not be viewed as a substitute for financial
statements prepared in accordance with U.S. GAAP and they are not
necessarily indicative of the results for any future period.
Accordingly, you should not place undue reliance on these
estimates.
These estimates were prepared by, and are the responsibility of,
the Company’s management and are based upon a number of
assumptions, including but not limited to, estimates related to the
resolution of deficiencies with financing counterparties, the
valuation of certain of its assets and the restructuring of certain
of its financing arrangements. Additional items that may require
adjustments to these estimates may be identified and could result
in material changes to these estimates. The Company undertakes no
obligation to update this information. PricewaterhouseCoopers LLP
(“PwC”), the Company’s independent registered public accounting
firm, has not audited, reviewed, compiled or performed any
procedures with respect to the estimated financial information set
forth herein. Accordingly, PwC does not express an opinion or
provide any form of assurance with respect thereto.
Extension for Filing of Form 10-Q
The ongoing COVID-19 pandemic has caused disruptions in the
Company’s day-to-day activities. While the Company’s Manager has
the technology in place for all of its employees to work remotely,
the Company’s sole office is (and many of the Company’s advisors,
service providers and counterparties are) located in New York City,
which has been significantly affected by COVID-19, and which has
caused delays in the receipt of information from various
counterparties. This, in turn, has delayed the Company’s ability to
complete the Quarterly Report on Form 10-Q for the quarter ended
March 31, 2020 (the “Quarterly Report”). As a result, the Company
will be relying on the Securities and Exchange Commission’s (the
“SEC”) Orders under Section 36 of the Securities Exchange Act of
1934, as amended (Release Nos. 34-88318 and 34-88465), to delay the
filing of its Quarterly Report. The Company expects to file the
Quarterly Report on or before June 25, 2020, which is 45 days from
the original filing deadline of May 11, 2020.
ABOUT AG MORTGAGE INVESTMENT TRUST, INC.
AG Mortgage Investment Trust, Inc. is a hybrid mortgage REIT
that opportunistically invests in and manages a diversified
risk-adjusted portfolio of Agency RMBS and Credit Investments,
which include Residential Investments and Commercial Investments.
AG Mortgage Investment Trust, Inc. is externally managed and
advised by AG REIT Management, LLC, a subsidiary of Angelo, Gordon
& Co., L.P., an SEC-registered investment adviser that
specializes in alternative investment activities.
FORWARD LOOKING STATEMENTS
This press release includes “forward-looking statements” within
the meaning of the safe harbor provisions of the United States
Private Securities Litigation Reform Act of 1995 related to the
sale of certain of the Company’s assets, the Company’s outstanding
indebtedness and investment portfolio, certain additional financial
metrics, and the Company’s ability meet certain deadlines related
to its filings with the Securities and Exchange Commission, among
others. Forward-looking statements are based on estimates,
projections, beliefs and assumptions of management of the Company
at the time of such statements and are not guarantees of future
performance. Forward-looking statements involve risks and
uncertainties in predicting future results and conditions. Actual
results and outcomes could differ materially from those projected
in these forward-looking statements due to a variety of factors and
the impact of the COVID-19 pandemic on these factors, including,
without limitation, changes in interest rates, changes in default
rates, changes in the yield curve, changes in prepayment rates, the
availability and terms of financing, changes in the market value of
our assets, general economic conditions, conditions in the market
for Agency RMBS, Non-Agency RMBS and CMBS securities, Excess MSRs
and loans, our ability to predict and control costs, our ability to
maintain our exemption from registration under the Investment
Company Act of 1940, as amended, conditions in the real estate
market, legislative and regulatory actions by the U.S. Department
of the Treasury, the Federal Reserve and other agencies and
instrumentalities in response to the economic effects of the
COVID-19 pandemic, our negotiations with our repurchase financing
counterparties and the Manager, our ability to negotiate, to the
extent necessary, further extensions of the forbearance period with
the Participating Counterparties and to enter into settlements with
non-Participating Counterparties, our ability to complete the Loan
Sale and, if completed, the timing and terms of completion, and our
ability to accurately estimate our book value per share and our
investment portfolio as of April 30, 2020. Additional information
concerning these and other risk factors are contained in the
Company’s filings with the SEC, including its most recent Annual
Report on Form 10-K and subsequent filings. Copies are available
free of charge on the SEC’s website, http://www.sec.gov/. The
Company undertakes no duty to update any forward-looking statements
in this Press Release to reflect any change in its expectations or
any change in events, conditions or circumstances on which any such
statement is based.
Footnotes
1The Company's $1.4 billion investment portfolio includes
approximately $340 million of assets held through investments in
debt and equity of affiliates, consisting of approximately 99%
residential investments and less than 1% agency derivatives. These
figures reflect the Company’s percentage interest in the respective
affiliates. 2The Company's investment portfolio does not include
the Company's $20 million net investment in Arc Home. 3The
Company's $1.1 billion of debt obligations includes approximately
$270 million of repurchase obligations held through investments in
debt and equity of affiliates, net of cash posted as collateral.
The $690 million of the Company's total recourse repurchase
obligations and the $600 million of recourse obligations included
under the Forbearance Agreements includes approximately $50 million
of repurchase obligations held through investments in debt and
equity of affiliates, net of cash posted as collateral. These
figures reflect the Company’s percentage interest in the respective
affiliates. 4The $300 million of repurchase obligations includes
approximately $50 million of repurchase obligations held through
investments in debt and equity of affiliates, net of cash posted as
collateral. These figures reflect the Company’s percentage interest
in the respective affiliates. 5Per share amounts for book value are
calculated using all outstanding common shares in accordance with
U.S. GAAP, including all vested shares granted to the Manager and
our independent directors under our equity incentive plans as of
April 30. 2020. Book value is calculated using stockholders’ equity
less net proceeds of our 8.25% Series A Cumulative Redeemable
Preferred Stock ($49.9 million), 8.00% Series B Cumulative
Redeemable Preferred Stock ($111.3 million), and 8.000% Series C
Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock
($111.2 million) as the numerator. The liquidation preference for
the Series A, Series B and Series C Preferred Stock is $51.8
million, $115 million and $115 million, respectively.
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AG Mortgage Investment Trust, Inc. Investor Relations
(212) 692-2110 ir@agmit.com
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