Business Context and Reporting Period
This Form 8-K Current Report was filed by Chimera Investment Corporation on February 22, 2017. The filing details the entry into a material definitive agreement for a preferred stock offering and the subsequent material modifications to the rights of security holders. The offering closed on February 27, 2017.
Key Financial Metrics and Capital Structure
- Offering Size: 12,000,000 shares of 8.00% Series B Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock, with an option for an additional 1,800,000 shares (total potential: 13,800,000 shares).
- Offering Price: $25.00 per share.
- Net Proceeds: Approximately $290.2 million (excluding over-allotment); up to $333.7 million if the over-allotment option is fully exercised.
- Dividend Rate: Fixed at 8.00% per annum ($2.00 per share) from February 27, 2017, until March 30, 2024. Thereafter, it converts to a floating rate of three-month LIBOR plus 5.791%.
- Seniority: The Series B Preferred Stock ranks senior to the Company's common stock regarding dividends and liquidation rights.
Material Changes
The primary material change is the issuance of new equity capital through the Series B Preferred Stock offering. This transaction increases the Company's capital base and alters its capital structure by introducing a new class of senior securities with cumulative dividend obligations. The filing also notes the filing of Articles Supplementary with the State of Maryland to designate these new shares.
Outlook, Risks, and Terms
- Redemption: The stock is not redeemable before March 30, 2024, except under limited circumstances to preserve REIT qualification or upon a Change of Control. On or after March 30, 2024, the Company may redeem the stock at $25.00 per share plus accrued dividends.
- Change of Control: Upon a Change of Control, the Company may redeem the stock within 120 days, or holders may convert the preferred stock into common stock based on a formula.
- Voting Rights: Holders generally have no voting rights but gain limited rights if dividends are unpaid for six or more full quarterly periods.
- REIT Status: Ownership restrictions are in place to preserve the Company's qualification as a Real Estate Investment Trust (REIT).
- Financial Metrics: The filing does not provide updated revenue, profit, cash flow, or debt metrics beyond the proceeds from this specific offering.
Investor Verification Checklist
- Verify the full exercise of the 1,800,000 share over-allotment option to confirm total capital raised.
- Review the Articles Supplementary (Exhibit 3.1) for specific details on the Change of Control conversion formula.
- Confirm the Company's continued qualification as a REIT following the issuance of preferred stock.
- Monitor the Company's ability to service the new fixed dividend obligation of $2.00 per share quarterly.