NEW YORK, April 10, 2020 /PRNewswire/ -- MFA Financial,
Inc. (NYSE: MFA) (the "Company") announced today the following
updates with respect to its business operations.
- Forbearance Agreement. On April 10, 2020, the Company and its repurchase
agreement counterparties holding a significant majority of its
outstanding repurchase obligations entered into a Forbearance
Agreement. On March 24, 2020,
the Company had announced that due to the turmoil in the financial
markets resulting from the COVID-19 pandemic, the Company was
engaged in discussions with its financing counterparties regarding
forbearance with respect to the Company's obligations under its
repurchase agreement financing arrangements, which were
approximately $9.5 billion as of
March 20, 2020.
Since the date of that
announcement through April 9, 2020,
the Company's indebtedness under such arrangements has decreased to
approximately $5.8 billion. This
reduction occurred as a result of sales of certain assets and the
payoff of the associated repurchase agreement obligations.
Additional details regarding the
Forbearance Agreement include:
- Participating counterparties to the Forbearance Agreement
represent repurchase obligations of an aggregate of $4.8 billion, or 83%, of repurchase agreement
obligations outstanding as of the date of the Forbearance
Agreement. In addition, the Company believes that it has good
working relationships with certain other counterparties that are
not participating in the Forbearance Agreement, representing the
remaining 17% of total repurchase obligations.
- In connection with the Forbearance Agreement, the Company also
granted the participating counterparties a security interest in
Company assets that were unencumbered prior to the Forbearance
Agreement, including residential whole loans, real estate owned,
unrestricted cash and other assets with an estimated market value
as of the date of the Forbearance Agreement of approximately
$1.3 billion.
- Counterparties have agreed to forbear from exercising any
rights or remedies for 15 days (unless terminated sooner upon the
occurrence of certain events) under their respective repurchase
agreements, including selling collateral to enforce margin
calls. The Forbearance Agreement provides the Company with
the ability, subject to counterparty consent, to extend forbearance
for up to an additional 75 days, subject to the Company's ongoing
compliance with various obligations.
- During the period covered by the Forbearance Agreement, the
Company intends to continue to pursue asset sales and explore other
potential transactions to reduce its obligations under its
repurchase agreements and raise cash to bolster its liquidity.
- Liquidity and Portfolio Update. In response
to the unprecedented market conditions experienced since mid-March,
the Company has taken steps to manage and de-lever its portfolio
and generate liquidity, particularly in relation to its investments
in certain residential mortgage securities. Specific actions
taken by the Company include:
-
- Sales of residential mortgage assets generating proceeds of
$3.5 billion, which were used to
reduce the associated repurchase agreement obligations. The
Company has disposed of approximately $2.9
billion of residential mortgage securities, including
$1.4 billion of Agency MBS,
$1.3 billion of Non-Agency MBS and
$44.7 million of CRT
securities. In addition, the Company disposed of $659.9 million of residential whole loans and
$136.8 million of MSR-related
assets. As a result of these collective actions, the Company
has reduced its overall exposure to unpaid margin calls by
approximately 43%.
- The Company unwound all of its approximately $4.1 billion of swap hedging transactions, which
resulted in the recovery of approximately $33.0 million of cash margin that had been posted
with the relevant exchange during the period those transactions
were outstanding.
- Cash and liquidity update. As of
April 9, 2020, the Company had total
cash balances of $423.4 million,
including unrestricted cash balances prior to the effectiveness of
the Forbearance Agreement, totaling $225.3
million. Settlement on April 13,
2020, of certain sale transactions executed this week is
expected to result in further net cash receipts of approximately
$49.3 million. In addition, the
Company has cash on deposit with repurchase agreement
counterparties totaling $198.1
million, primarily reflecting margin posted prior to
entering into Forbearance Agreement discussions.
- Book value per common share. Through
March 31, 2020, the Company estimates
that GAAP book value per common share has decreased approximately
35-40% since December 31, 2019, to
between $4.22 and $4.58, and its Economic book value per share, a
non-GAAP financial measure, has decreased approximately 45-50%
since December 31, 2019, to between
$3.72 and $4.09.
- Business Continuity. The Company has fully
implemented its Business Continuity Plan and has transitioned
completely to a remote work environment to address the operating
risks associated with the global COVID-19 pandemic, has thus far
not experienced any significant changes from normal working
patterns, and continues to take decisive action to best position
the Company's business and portfolio.
About MFA Financial, Inc.
MFA Financial, Inc. is a real estate investment trust primarily
engaged in the business of investing, on a leveraged basis, in
residential mortgage assets, including residential mortgage-backed
securities and residential whole loans.
Cautionary Language Regarding Forward-Looking
Statements
When used in this report or other written or oral
communications, statements which are not historical in nature,
including those containing words such as "will," "believe,"
"expect," "anticipate," "estimate," "plan," "continue," "intend,"
"should," "could," "would," "may" or similar expressions, are
intended to identify "forward-looking statements" within the
meaning of Section 27A of the Securities Act and Section 21E of the
Exchange Act, and, as such, may involve known and unknown risks,
uncertainties and assumptions. Statements regarding the following
subjects, among others, may be forward-looking: the Company's
estimates of its outstanding borrowings under its financing
arrangements, uncertainties related to negotiations with the
Company's financing counterparties including with respect to any
forbearance agreement and the timing of any such agreement or the
terms thereof, and other financial and operational metrics included
herein. Forward-looking statements are based on estimates,
projections, beliefs and assumptions of management of the Company
at the time of such statements and are not guarantees of future
performance. Forward-looking statements involve risks and
uncertainties in predicting future results and conditions. Actual
results and outcomes could differ materially from those projected
in these forward-looking statements due to a variety of factors,
including, without limitation, risks related to the Forbearance
Agreement, including the duration of such agreement, the Company's
ability to meet its ongoing obligations under such agreement, and
the Company's ongoing discussions with nonparticipating
counterparties, the Company's ability to accurately estimate its
first quarter book value per common share, its portfolio
composition and cash balances and unencumbered assets (particularly
in light of the highly volatile and uncertain market conditions),
the Company's ability to accurately estimate its outstanding
borrowings under its financing arrangements, changes in interest
rates, changes in default rates, changes in the yield curve,
changes in prepayment rates, the availability and terms of
financing, changes in the market value of our assets, general
economic conditions, conditions in the market for our residential
mortgage backed securities, residential whole loans, residential
mortgage securities, MSR-related assets and other assets, the
timing and amount of distributions to our stockholders, our ability
to maintain our exemption from registration under the Investment
Company Act of 1940, as amended, conditions in the real estate
market, legislative and regulatory changes that could adversely
affect the business of the Company and the ongoing spread and
economic and operational effects of the COVID-19 virus. Additional
information concerning these and other risk factors are contained
in the Company's filings with the Securities and Exchange
Commission, including our most recent Annual Report on Form 10-K
and subsequent filings. All information in this press release is as
of April 10, 2020. The Company
undertakes no duty to update any forward-looking statements to
reflect any change in its expectations or any change in events,
conditions or circumstances on which any such statement is
based.
Investor Contact:
InvestorRelations@mfafinancial.com
MFA Investor
Relations
212-207-6488
Media Contact:
Abernathy MacGregor
Tom Johnson
212-371-5999
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SOURCE MFA Financial, Inc.