Business Context and Reporting Period
This Form 8-K Current Report was filed by Cherry Hill Mortgage Investment Corporation on February 4, 2019, with the earliest event reported on that date. The filing details the designation of new preferred stock and the execution of an underwriting agreement for a public offering.
Key Financial Metrics and Capital Structure
The filing focuses on a capital raise rather than operational financial performance. Key metrics include:
- Offering Size: 1,800,000 shares of Series B Preferred Stock.
- Offering Price: $25.00 per share.
- Over-Allotment Option: Underwriters granted a 30-day option to purchase up to 270,000 additional shares.
- Authorized Shares: 2,070,000 shares of Series B Preferred Stock designated.
- Dividend Rate (Fixed): 8.250% per annum ($2.0625 per share) from issuance until April 15, 2024.
- Dividend Rate (Floating): Three-Month LIBOR plus 5.631% per annum, effective April 15, 2024.
- Liquidity/Debt: The filing does not provide current cash flow, total debt, or liquidity ratios. Proceeds are expected to be contributed to the Operating Partnership.
Material Changes
The primary material change is the authorization and sale of the 8.250% Series B Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock. This represents a new class of equity capital with specific dividend obligations and redemption features. Additionally, the Agreement of Limited Partnership for Cherry Hill Operating Partnership, LP, was amended to authorize the issuance of corresponding Series B Preferred Units.
Guidance, Outlook, and Risks
Outlook and Timing: The closing of the offering is expected on February 11, 2019, subject to customary closing conditions. The fixed dividend rate is locked until April 15, 2024, after which it floats based on LIBOR.
Redemption Terms: The stock is not redeemable by the Company prior to April 15, 2024, except to preserve REIT qualification or upon a Change of Control. After April 15, 2024, the Company may redeem the stock at $25.00 per share plus accrued dividends.
Risks and Contingencies:
- REIT Qualification: Ownership restrictions are in place to maintain the Company's status as a Real Estate Investment Trust (REIT).
- Change of Control: Holders have the right to convert preferred stock to common stock upon a Change of Control if the Company does not exercise its redemption option.
- Voting Rights: Holders generally have no voting rights except under limited circumstances.
Investor Verification Checklist
- Verify the actual closing date of the offering (expected February 11, 2019) and the final number of shares sold, including any exercise of the over-allotment option.
- Confirm the total net proceeds received after underwriting discounts and expenses.
- Review the specific terms of the "Change of Control" definition in the Articles Supplementary to understand conversion triggers.
- Monitor the Company's ability to maintain REIT qualification given the new preferred stock structure.
- Check subsequent filings for the actual contribution of proceeds to the Operating Partnership.