NEW YORK, March 30, 2020 /PRNewswire/ -- Ready Capital
Corporation ("Ready Capital" or the "Company") (NYSE: RC), today
announced a company update related to the continued market
volatility due to the novel COVID-19 pandemic and issued an open
letter to its shareholders. The text follows:
To Our Shareholders:
In light of the increased volatility and market instability
caused by the COVID-19 pandemic, we are providing a special
supplemental update on our operations and financial position. The
Company is focused on increasing liquidity, managing mark-to-market
liabilities, book value preservation through pre-emptive asset
management and identifying opportunities to leverage our
government-backed lending franchises.
To increase our cash balances, we continue to implement several
measures. First, as announced on March 20,
2020, our board of directors decided to pay 80% of our first
quarter dividend in shares of our common stock and 20% in
cash. Next, we have focused our lending activities on our
federally-backed governmental programs, including our SBA 7(a),
Freddie Mac SBL and residential mortgage banking platforms.
We have also been more selective in our fixed and bridge loan
segments due to their capital-intensive nature. Additionally, we
continue to seek to access additional liquidity by pledging
unencumbered loans to our warehouse lines and we are continuing to
monitor the portfolio for potential asset sales, should the need
arise. Lastly, we are preserving cash by reducing cash operating
expenses, with a plan to reduce staffing expenditures by 25%.
Despite these proactive steps, there can be no assurance that
macroeconomic conditions will not worsen, which may negatively
impact our liquidity position or our ability to generate additional
liquidity.
The Company's investment portfolio is financed through a
combination of non-recourse securitized debt, market-to-market
warehouse facilities and revolving repurchase facilities. As of
close of business on March 27, 2020,
the Company has $1.1 billion
outstanding on our warehouse lines, collateralized by $1.5 billion in principal amount of commercial
real estate loans and mortgage servicing rights. We have an
additional $284 million of revolving
repurchase facilities collateralized by $429
million in principal amount of commercial mortgage backed
securities. The Company continues constructive dialogue with our
lenders and since March 1, 2020, the
Company has paid $63 million of
margin calls.
In addition to the above liabilities, we have an additional
$187 million of outstanding
borrowings on our government lending segments, including our
Freddie Mac multifamily and residential mortgage banking platforms.
Given the governmental-backed sponsorship, we do not consider these
assets to be subject to significant mark-to-market risk.
Our manager's small balance commercial ("SBC") special servicing
resources, which are extensive, have acquired approximately
$5.0 billion of SBC non-performing
loans and have resolved approximately 6,000 individual loans since
the 2008 recession. Our loan portfolio enjoys significant
diversification, featuring approximately 4,500 loans with an
average balance of $900 thousand with
the top 10 borrowers representing only 7% of gross assets. We
remain focused on areas of the loan portfolio we believe to be
under the most pressure, including hospitality, retail and
restaurants. In our commercial real estate ("CRE")
segments, retail and hospitality represents 21% and 6% of the total
gross loan portfolio, respectively. The average unpaid principal
balance of our CRE retail exposure is $1.5
million, reflective of Company's limited exposure to malls
and big-box retail. In our SBA segment, where we have invested
approximately 10% of Stockholders' Equity, total exposure to
hospitality, restaurants and retail is approximately 42%.
The COVID-19 pandemic has negatively impacted the commercial
real estate loan market and although future performance remains
uncertain and may be negatively impacted, we believe there remains
significant value in assets underlying our loan portfolio. Ready
Capital's asset management team is connecting directly with
borrowers to proactively resolve individual challenges.
Across all platforms, we are re-purposing lending/underwriting
staff to assist us in contacting borrowers, in many cases to
discuss forbearance.
We also do see significant areas of opportunity in Ready
Capital's diversified business model, particularly in our SBA 7(a)
segment. The Company's national SBA lender, ReadyCap Lending, is
positioned to extend capital as part of the Coronavirus Aid, Relief
and Economic Security Act ("CARES Act"). The proposal calls for
existing SBA lenders to extend up to $350
billion in loans to small business to cover payroll,
occupancy and operating expenses through the Paycheck Protection
Program ("PPP Program") and more than doubles regular 7(a) lending
capacity. The PPP Program includes a 100% guarantee from the
federal government for loans up to $10
million and a guaranteed loan purchase from the lender's
balance sheet. Ready Capital, by deploying the front-end technology
embedded in our fintech lending platform, Knight Capital (which
provides working capital advances to small businesses), is uniquely
positioned to capture market share in this area as compared to
banks who may lack the ability to source and efficiently process
small loans. The SBA has designated Ready Capital as one of a
handful of non-bank SBA lenders eligible to accept PPP loan
applications with the potential for significant volume over the
coming months. Additionally, our residential mortgage banking and
Freddie Mac SBL segments remain active.
As of the close of business on March 27,
2020, the Company's stock price is trading at $7.65, a 53% discount to our previously reported
book value per share as of December 31,
2019. The evolving situation and its ultimate impact on our
business remains fluid. However, our extensive special
servicing infrastructure (that managed through the last recession)
is on hand to support us as we seek to manage through the COVID-19
crisis and pending recession, access or help our borrowers access
government-sponsored financing and lending programs and protect our
book value from further erosion from credit loss.
We look forward to leveraging our various lending segments to
help support the challenges our economy faces. We continue to
care for our colleagues, partners and stakeholders affected by this
public health issue. Our thoughts remain with the individuals and
communities affected across the world as the public health response
to COVID-19 continues.
Thomas E. Capasse
Chairman and Chief Executive Officer
Safe Harbor Statement
This press release contains statements
that constitute "forward-looking statements," as such
term is defined in Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act
of 1934, as amended, and such statements are intended to be covered
by the safe harbor provided by the same. These statements
are based on management's current expectations and beliefs and are
subject to a number of trends and uncertainties that could cause
actual results to differ materially from those described in the
forward-looking statements; the Company can give no assurance
that its expectations will be attained. Factors that could cause
actual results to differ materially from the Company's
expectations include, but are not limited to, applicable regulatory
changes; the impact to the Company's business from the COVID-19
situation; volatility of the capital markets; changes in the
Company's investment objectives and business strategy; the
availability of financing on acceptable terms or at all; the
availability, terms and deployment of capital; the availability of
suitable investment opportunities; changes in the interest rates or
the general economy; increased rates of default and/or decreased
recovery rates on investments; changes in interest rates, interest
rate spreads, the yield curve or prepayment rates; changes in
prepayments of Company's assets; the degree and nature of
competition, including competition for the Company's target assets;
and other factors, including those set forth in the Risk Factors
section of the Company's most recent Annual Report on Form 10-K
filed with the SEC, and other reports filed by the Company
with the SEC, copies of which are available on the SEC's
website, www.sec.gov. The Company undertakes no obligation to
update these statements for revisions or changes after the date of
this release, except as required by law.
About Ready Capital Corporation
Ready Capital
Corporation (NYSE: RC) is a multi-strategy real estate finance
company that originates, acquires, finances and services small to
medium balance commercial loans. Ready Capital specializes in loans
backed by commercial real estate, including agency multifamily,
investor and bridge as well as SBA 7(a) business loans.
Headquartered in New York, New
York, Ready Capital employs over 400 lending professionals
nationwide. The company is externally managed and advised by
Waterfall Asset Management, LLC.
Contact
Investor Relations
Ready Capital Corporation
212-257-4666
InvestorRelations@readycapital.com
Additional information can be found on the Company's website at
www.readycapital.com
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SOURCE Ready Capital Corporation