Business Context and Reporting Period
This Form 8-K was filed by Hunt Companies Finance Trust, Inc. (the "Company") on January 15, 2019. The Company is a Maryland corporation focused on commercial real estate finance. The report details the entry into a material definitive agreement regarding a new senior secured corporate term loan.
Key Financial Metrics and Debt Structure
The filing discloses the following specific financial terms regarding the new debt facility:
- Principal Amount: $40,250,000
- Maturity: 6 years
- Interest Rate: Fixed at 7.25% for the first five years, with step-ups of 0.25%, 0.375%, and 0.50% in the final year.
- Collateral: Secured by substantially all assets of the Credit Parties (Company, Five Oaks Acquisition Corp., and Hunt CMT Equity, LLC).
- Borrowing Base: Determined quarterly based on eligible assets including senior/subordinated commercial real estate mortgage loans, preferred equity, and construction loans.
The filing text does not provide clear values for revenue, profit, cash flow, margins, or overall liquidity positions outside of this specific transaction.
Material Changes
The primary material change is the creation of a new direct financial obligation. On January 15, 2019, the Company and its affiliates entered into a Credit Agreement to draw the $40.25 million term facility. This increases the Company's leverage and introduces new debt service obligations and covenants.
Guidance, Risks, and Covenants
The Credit Agreement includes standard affirmative and negative covenants that the Company must maintain, including:
- Minimum asset coverage ratio
- Minimum unencumbered assets ratio
- Maximum total net leverage ratio
- Minimum tangible net worth
- Interest charge coverage ratio
Events of default include nonpayment, covenant violations, cross-defaults, material judgments, bankruptcy events, and change of control. The filing does not provide forward-looking guidance on earnings or future asset acquisition targets beyond the terms of this loan.
Investor Verification Checklist
- Verify the current composition of the "Eligible Assets" supporting the $40.25 million borrowing base.
- Confirm the Company's compliance with the new leverage and coverage covenants immediately following the draw.
- Review the full Credit Agreement (Exhibit 10.1) for specific definitions of "Eligible Assets" and advance rates.
- Assess the impact of the 7.25% fixed interest rate on the Company's net interest spread given current market rates.
- Monitor the step-up interest rate schedule beginning in the sixth year of the loan.