Business Context and Reporting Period
Chimera Investment Corporation, a Maryland corporation and Real Estate Investment Trust (REIT), filed this Form 8-K on September 13, 2018. The filing reports the entry into a material definitive agreement to issue preferred stock and the subsequent filing of Articles Supplementary to designate the rights of such stock.
Key Financial Metrics and Transaction Details
- Offering Size: 10,000,000 shares of 7.75% Series C Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock, with an option for underwriters to purchase up to an additional 1,500,000 shares.
- Offering Price: $25.00 per share.
- Estimated Net Proceeds: Approximately $241.9 million (or $278.2 million if the over-allotment option is fully exercised), after deducting underwriting discounts and estimated offering expenses.
- Dividend Rate: Fixed at 7.75% per annum ($1.9375 per share) from September 20, 2018, through September 30, 2025. Thereafter, the rate floats at three-month LIBOR plus 4.743%.
- Dividend Payment Schedule: Quarterly in arrears, beginning December 30, 2018.
- Redemption: Non-redeemable prior to September 30, 2025, except under limited REIT qualification circumstances or a Change of Control. Redeemable thereafter at $25.00 per share plus accrued dividends.
Material Changes Versus Prior Period
This filing represents a new capital raise event rather than a comparison to prior financial periods. The filing does not provide comparative revenue, profit, or cash flow data against previous periods. The primary material change is the expansion of the Company's capital structure through the issuance of the Series C Preferred Stock.
Guidance, Outlook, and Risks
- Closing Date: The offering is expected to close on September 20, 2018, subject to customary closing conditions.
- Underwriters: Morgan Stanley & Co. LLC, RBC Capital Markets, LLC, UBS Securities LLC, Wells Fargo Securities, LLC, and Keefe, Bruyette & Woods, Inc.
- Risks and Contingencies: The transaction is subject to customary closing conditions. The Series C Preferred Stock includes ownership restrictions to preserve the Company's REIT qualification. Holders generally have no voting rights unless dividends are in arrears for six or more full quarterly periods.
- Change of Control: Upon a Change of Control, holders may convert shares to Common Stock or the Company may redeem shares at $25.00 per share plus accrued dividends.
Key Facts for Investor Verification
- Verify the final closing date and whether the underwriters exercised the 1,500,000 share over-allotment option.
- Confirm the actual net proceeds received after final underwriting discounts and offering expenses.
- Review the Articles Supplementary (Exhibit 3.1) for specific terms regarding REIT qualification restrictions and voting rights triggers.
- Monitor the Company's ability to pay the initial fixed dividend of $1.9375 per share quarterly starting December 30, 2018.