Business Context and Reporting Period
This Form 8-K is a current report filed by AG Mortgage Investment Trust, Inc. (MITT) on June 1, 2020, covering events occurring on May 28, 2020, and June 1, 2020. The Company, a Maryland corporation, operates as a mortgage investment trust focused on acquiring and managing mortgage loans and related securities. The filing details significant asset sales, debt restructuring, and litigation settlements.
Key Financial Metrics and Transactions
- Asset Sale: Sold a pool of mortgage loans with an approximate unpaid principal balance of $465 million for net proceeds of approximately $383 million.
- Debt Repayment: Net proceeds from the loan sale were used to repay indebtedness and associated payables secured by the loans totaling approximately $383 million.
- Litigation Settlement Costs: Paid $5.0 million in cash to Royal Bank of Canada (RBC) and issued a secured promissory note with a principal amount of $2.0 million.
- New Debt Instrument: The $2.0 million note to RBC accrues interest at 6.0% per annum and is due on July 27, 2020.
- Manager Note: An amended and restated secured promissory note of $20 million was issued to the external manager, AG REIT Management, LLC.
Material Changes and Agreements
Mortgage Loan Sale
On May 28, 2020, the Company entered into a Mortgage Loan Purchase and Sale Agreement (MLPSA) to sell specific loans to LVS Title Trust XIII. The transaction closed on the same date, resulting in the immediate repayment of secured debt.
Forbearance Extension
Following the expiration of a Second Forbearance Agreement on June 1, 2020, the Company entered into a Third Forbearance Agreement with participating counterparties. This agreement extended the forbearance period regarding events of default under repurchase agreements until June 15, 2020, or the occurrence of a Triggering Event.
Litigation Settlement
The Company settled a dispute with RBC regarding alleged events of default. The settlement required the dismissal of the Company's lawsuit with prejudice and a mutual release of claims. The settlement involved a cash payment and the issuance of a new secured note.
Capital Structure and Priority
The filing establishes a specific priority of claims on the Company's assets:
- First Priority: Obligations to Participating Counterparties under the Third Forbearance Agreement.
- Second Priority: The $2.0 million Note payable to RBC.
- Third Priority: The $20 million Note payable to AG REIT Management, LLC.
Guidance, Risks, and Contingencies
The filing contains forward-looking statements regarding the Company's investment portfolio, indebtedness, and ability to negotiate further forbearance extensions. Management highlighted several risks, including:
- Impact of the COVID-19 pandemic on economic conditions and the real estate market.
- Changes in interest rates, default rates, prepayment rates, and the yield curve.
- Availability and terms of financing.
- Ability to maintain exemption from registration under the Investment Company Act of 1940.
- Uncertainty regarding negotiations with non-participating counterparties.
The filing does not provide specific revenue, profit, or cash flow metrics for a reporting period, as it focuses on discrete transactional events rather than periodic financial performance.
Investor Verification Checklist
- Verify the exact composition and quality of the $465 million loan pool sold and the specific terms of the $383 million debt repayment.
- Confirm the status of the Third Forbearance Agreement and whether a Triggering Event has occurred prior to the June 15, 2020 deadline.
- Review the full text of the RBC settlement agreement and the subordination agreements to understand the legal implications of the new debt hierarchy.
- Assess the Company's liquidity position following the $5.0 million cash outflow for the RBC settlement.
- Monitor the Company's ability to refinance or repay the $2.0 million RBC note due July 27, 2020.