Arbor Realty Trust, Inc. - Form 8-K Summary
Business Context and Reporting Period
This Current Report on Form 8-K was filed by Arbor Realty Trust, Inc. on January 27, 2017. The filing reports the completion of a material definitive agreement involving the issuance of additional convertible senior notes.
Key Financial Metrics and Transaction Details
- Transaction Type: Issuance and sale of $13.75 million aggregate principal amount of 6.50% Convertible Senior Notes due 2019 (the "Reopened Notes").
- Total Outstanding Debt: Following this offering, the aggregate outstanding principal amount of the 6.50% Convertible Senior Notes due 2019 is $100 million (combining the new $13.75 million with the existing $86.25 million issued in October 2016).
- Net Proceeds: Approximately $13.4 million after deducting underwriter discounts, commissions, and estimated offering expenses.
- Interest Rate: 6.50% per year, payable semiannually in arrears on April 1 and October 1, beginning April 1, 2017.
- Maturity Date: October 1, 2019.
- Conversion Terms: Initial conversion rate of 119.3033 shares per $1,000 principal amount (approximate conversion price of $8.38 per share). Conversion is permitted prior to July 1, 2019 under certain conditions, and at any time on or after July 1, 2019 until the business day preceding maturity.
- Use of Proceeds: Investments relating to the Company's business and general corporate purposes.
Material Changes
The primary material change is the increase in the Company's debt obligations. The Company has expanded its existing series of 6.50% Convertible Senior Notes due 2019 by reopening the offering, increasing the total principal from $86.25 million to $100 million. The Reopened Notes are fully fungible with and rank equally with the Existing Notes.
Outlook, Risks, and Contingencies
- Redemption: The Company does not have the right to redeem the Reopened Notes prior to maturity, and no sinking fund is provided.
- Fundamental Change Repurchase: If the Company undergoes a "fundamental change," holders may require the Company to repurchase the notes at 100% of the principal amount plus accrued and unpaid interest.
- Settlement: The Company may settle conversions in cash, shares of common stock, or a combination thereof, at its election.
- Legal Opinions: Legal opinions regarding the legality of the notes were provided by Skadden, Arps, Slate, Meagher & Flom LLP and Venable LLP.
Investor Verification Checklist
- Verify the total outstanding principal of $100 million for the 6.50% Convertible Senior Notes due 2019.
- Confirm the net proceeds of approximately $13.4 million received from the January 27, 2017 offering.
- Review the conversion price of approximately $8.38 per share and the associated dilution potential.
- Check the Company's liquidity position to ensure it can meet the semiannual interest payments starting April 1, 2017.
- Examine the "Fundamental Change" definition in the Second Supplemental Indenture to understand repurchase triggers.