Business Context and Reporting Period
This Form 8-K, filed on April 13, 2020, reports on events occurring on April 10, 2020, for AG Mortgage Investment Trust, Inc. (MITT). The filing details the entry into a material Forbearance Agreement with major financing counterparties and the issuance of a subordinated promissory note to its manager, AG REIT Management, LLC.
Key Financial Metrics and Agreements
- Financing Under Forbearance: Approximately $750 million in outstanding financing arrangements with Participating Counterparties as of April 9, 2020.
- Debt Coverage: The $750 million represents approximately 82% of the Company's total recourse financing arrangements outstanding at the time.
- New Subordinated Debt: Issuance of a $10 million secured promissory note to the Manager with a 6.0% annual interest rate, payable in kind (PIK).
- Interest Rate Terms: During the Forbearance Period, interest on repurchase agreements accrues at the greater of (LIBOR + 2.50%) or 3.50%. Any excess interest over this rate is deferred until the termination of the Forbearance Period.
- Liquidity Restrictions: The Company is prohibited from paying management fees or dividends on preferred or common stock during the Forbearance Period.
Material Changes and Operational Constraints
The Company has entered a Forbearance Period lasting up to 15 calendar days from the Effective Date, subject to earlier termination upon a "Triggering Event." Key operational changes include:
- Security Interest: The Company granted a security interest and lien on all assets to a Collateral Agent (Wilmington Trust) for the benefit of Participating Counterparties.
- Deleveraging Mandate: The Company must use commercially reasonable efforts to undertake a deleveraging process.
- Trading Restrictions: The Company is restricted from entering new repurchase agreements, forward transactions, or hedging agreements without consent.
- Triggering Events: Defaults include failure to comply with the agreement, bankruptcy filings, or if the CMBX.NA.AAA.13 Index remains 20% below its commencement level for three consecutive trading days.
Outlook, Risks, and Management Commentary
Management is engaged in discussions with non-participating counterparties and has retained Evercore to advise the independent board on capital raising and strategic options. The filing highlights significant risks related to the novel coronavirus (COVID-19), changes in interest rates, and the market value of Non-Agency RMBS and CMBS securities. The Company explicitly states it undertakes no duty to update forward-looking statements regarding its ability to predict indebtedness or the status of ongoing negotiations.
Investor Verification Checklist
- Verify the current status of the Forbearance Period and whether any Triggering Events have occurred.
- Confirm the outcome of discussions with non-participating counterparties not covered by the $750 million agreement.
- Monitor the CMBX.NA.AAA.13 Index levels relative to the commencement of the Forbearance Period.
- Review the progress of the deleveraging process and any asset sales executed under the agreement.
- Assess the impact of the $10 million PIK note on the Company's total leverage and future cash flow obligations.