Business Context and Reporting Period
This Form 8-K Current Report was filed by Five Oaks Investment Corp. on February 25, 2014. The filing discloses the entry into a material definitive agreement and the creation of a direct financial obligation. The Company, a Maryland corporation, operates as an investment firm focused on aggregating and securitizing prime jumbo residential mortgage loans.
Key Financial Metrics and Obligations
The filing details a new financing facility rather than reporting period-end financial results such as revenue or profit.
- Facility Type: Master Repurchase Agreement.
- Counterparty: Credit Suisse First Boston Mortgage Capital LLC (Buyer); Five Oaks Acquisition Corp. (Seller); Five Oaks Investment Corp. (Guarantor).
- Capacity: Aggregate maximum of $125,000,000.
- Term: 364 days, maturing on February 24, 2015, unless extended.
- Custodian: Wells Fargo Bank N.A.
- Financial Covenants: The Company is subject to covenants that are not more restrictive than its most restrictive existing covenants with other counterparties.
Material Changes and Agreements
On February 25, 2014, Five Oaks Acquisition Corp. (FOAC), a wholly owned subsidiary, entered into the Repurchase Agreement to finance the acquisition of eligible residential mortgage loans. The Company provided a guaranty for FOAC's obligations under this agreement. This facility supports the Company's strategy to aggregate and securitize loans. The agreement includes standard margin call provisions allowing Credit Suisse to require cash or loan transfers if the market value of purchased loans declines. The Company also maintains outstanding master repurchase agreements with two other Credit Suisse affiliates: Alpine Securitization Corp. and Credit Suisse Securities (USA) LLC.
Outlook, Risks, and Contingencies
The filing outlines customary events of default, including payment defaults, breaches of covenants, cross-defaults, and bankruptcy. Remedies for default include the repurchase of mortgage loans and liquidation by Credit Suisse. The filing does not provide specific forward-looking guidance, management commentary on future earnings, or details on unusual items beyond the execution of this new financing facility.
Investor Verification Checklist
- Verify the full text of the Master Repurchase Agreement (Exhibit 10.1) and Guaranty (Exhibit 10.2) for specific covenant thresholds and margin requirements.
- Confirm the Company's current leverage ratios to ensure compliance with the new financial covenants.
- Review the Company's existing relationships with Alpine Securitization Corp. and Credit Suisse Securities (USA) LLC to assess total exposure to Credit Suisse affiliates.
- Monitor the utilization rate of the $125 million facility to gauge the Company's near-term loan acquisition activity.