Item 1.01. Entry in a Material Definitive Agreement.
On April 6, 2020, AG Mortgage Investment Trust, Inc. (the "Company") and AG REIT
Management, LLC (the "Manager"), the Company's external manager, executed an
amendment (the "Management Agreement Amendment") to the management agreement,
dated as of June 29, 2011, by and between the Company and the Manager (the
"Management Agreement") pursuant to which the Manager agreed to defer the
Company's payment of the base management fee and reimbursement of expenses
provided by Sections and 7 and 8 of the Management Agreement.
The above description of the terms of the Management Agreement Amendment does
not purport to be complete and is qualified in its entirety by the full text of
the Management Agreement Amendment attached as Exhibit 10.1 hereto, and
incorporated herein by reference.
The Company is in final negotiations with certain of its financing
counterparties with respect to execution of a forbearance agreement as described
in Item 8.01 below, and has received executed signature pages in escrow from two
of its larger financing counterparties.
Item 2.04. Triggering Events That Accelerate or Increase a Direct Financial
Obligation or an Obligation under an Off-Balance Sheet Arrangement.
As previously announced, on Monday, March 23, 2020, the Company notified its
financing counterparties that it was not in a position to fund the margin calls
it received on March 23, 2020, and that the Company did not expect to be in a
position to fund the anticipated volume of future margin calls under its
financing arrangements in the near term as a result of market disruptions
created by the COVID-19 pandemic.
Since March 23, 2020, the Company and several of its subsidiaries have received
from several of its financing counterparties margin call notices, notifications
of alleged events of default and deficiency notices. Subject to the terms of the
applicable financing arrangements, if the Company fails to deliver additional
collateral or otherwise meet margin calls when due, the financing counterparties
may be able to demand immediate payment by the Company of the aggregate
outstanding financing obligations owed to such counterparties, and if such
financing obligations are not paid, may be permitted to sell the financed assets
and apply the proceeds to the Company's financing obligations and/or take
ownership of the assets securing the Company's financing obligations. The
Company may also be liable for a shortfall if the proceeds from such sale or
value of such assets is less than the relevant financing obligation. In the
event of a default under one or more of those agreements, financial and other
obligations under such agreements, and in some cases the Company's obligations
as a guarantor, may be accelerated and the counterparties may be able to take
ownership of the assets pledged to secure the financing obligations by the
Company or its subsidiaries. The Company and its subsidiaries also may be
subject to penalties under those agreements and may suffer cross-default claims
from its other lenders.
Through April 7, 2020, the Company has received an aggregate of approximately
$145 million of margin calls due to mark to market declines and haircut changes,
which it has not honored or otherwise met through the satisfaction of financing
liabilities. Additionally, through April 2, 2020, either the Company has sold,
or lenders have notified the Company that they have sold or taken ownership of,
assets subject to $425 million of certain financing obligations. In connection
therewith, the Company has also received deficiency and close-out notices from
certain counterparties alleging deficiencies aggregating approximately $34.2
million under these financing agreements. Approximately $29.6 million of such
deficiencies were alleged by certain affiliates of Royal Bank of Canada ("RBC")
by notice to the Company on April 2, 2020. As previously disclosed, the Company
disputes RBC's notices of events of default and deficiency amounts and filed a
suit in federal district court in New York describing the wrongful conduct by
RBC and seeking damages. The Company is unable to identify the ultimate
acquirers of all such assets because certain of the transactions were completed
by various financing counterparties through dealers. Additional counterparties
may sell in the future, assets pledged to secure financing obligations and the
Company cannot predict if such sales will result in positive or negative net
cash proceeds.
As previously reported, on March 23, 2020, the Company, in an effort to
prudently manage its portfolio through unprecedented market volatility and to
preserve long-term stockholder value, completed the sale of the Company's
portfolio of residential mortgage-backed securities issued or guaranteed by a
U.S. government-sponsored entity (the "Agency Portfolio"). After satisfaction of
an aggregate of approximately $880 million of repurchase financing obligations
with respect to the Agency Portfolio, the transaction netted the Company
approximately $38 million of cash proceeds.
The Company expects its cash and unencumbered assets to be pledged as collateral
for the benefit of its participating financing
--------------------------------------------------------------------------------
counterparties upon the execution of the forbearance agreement described in Item
8.01 below.
Item 7.01. Regulation FD Disclosure.
On April 8, 2020, the Company issued a press release, a copy of which is
furnished as Exhibit 99.1 hereto and is incorporated herein by reference.
Exhibit 99.1 hereto is being furnished pursuant to Item 7.01, and the
information contained therein shall not be deemed "filed" for the purposes of
Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), or otherwise subject to the liabilities of that section, nor shall it be
deemed incorporated by reference in any filing under the Securities Act of 1933,
as amended, or the Exchange Act, except as shall be expressly set forth by
specific reference in such filing.
Item 8.01. Other Events.
The Company continues to engage in discussions with its financing counterparties
with regard to entering into a forbearance agreement pursuant to which each
participating counterparty would agree to forbear from exercising its rights and
remedies with respect to an event of default under the applicable financing
arrangement for an agreed-upon period. The Company has made significant progress
with certain of its largest counterparties in these negotiations and believes it
has reached substantive agreement with these counterparties with respect to the
terms and form of a forbearance agreement. The Company has received in escrow
signature pages for the forbearance agreement and ancillary documents from two
of its larger financing counterparties and expects to receive signature pages
from additional counterparties. The Company understands that certain additional
counterparties are reviewing the terms and form of the forbearance agreement to
determine whether to participate. Nevertheless, the Company cannot predict
whether certain or any of its financing counterparties will enter into a
forbearance agreement, the timing of any such agreement, or the terms thereof.
The Company is supplementing the risk factors described under "Item 1A. Risk
Factors" in its Annual Report on Form 10-K for the year ended December 31, 2019
("Form 10-K") with the additional risk factor set forth below. This supplemental
risk factor should be read in conjunction with the other risk factors described
in the Form 10-K.
The novel coronavirus pandemic, measures intended to prevent its spread and
government actions to mitigate its economic impact has had and may continue to
have a material adverse effect on our business, results of operations and
financial condition.
The novel coronavirus (COVID-19) pandemic is causing significant disruptions to
the U.S. and global economies and has contributed to volatility and negative
pressure in financial markets. The outbreak has led governments and other
authorities around the world to impose measures intended to control its spread,
including restrictions on freedom of movement and business operations such as
travel bans, border closings, business closures, quarantines and
shelter-in-place orders. The impact of the pandemic and measures to prevent its
spread have negatively impacted us and could further negatively impact our
business. Recently, we have experienced declines in the value of our target
assets as well as adverse developments with respect to the cost and terms of
financing available to us, and have received margin calls, default notices and
deficiency letters from certain of our financing counterparties. Additionally,
we expect over the near and long term that the economic impacts of the pandemic
will impact the financial stability of the mortgage loans and mortgage loan
borrowers underlying the residential and commercial securities and loans that we
own and, as a result, anticipate that the number of borrowers who become
delinquent or default on their loans may increase significantly. Elevated levels
of delinquency or default would have an adverse impact on our income and the
value of our assets. Forced sales of the securities and other assets that secure
our repurchase and other financing arrangements in the current environment have
been, and will likely continue to be, on terms less favorable to us than might
otherwise be available in a regularly functioning market and could result in
deficiency judgments and other claims against us. To the extent current
conditions persist or worsen, we expect there to be a materially negative effect
on our results of operations, and, in turn, cash available for distribution to
our stockholders and on the value of our assets.
In response to the pandemic, the U.S. government has taken various actions to
support the economy and the continued functioning of the financial markets. The
Federal Reserve has announced its commitment to purchase unlimited amounts of
U.S. Treasuries, mortgage-backed securities, municipal bonds and other assets.
In addition, President Trump signed into law the Coronavirus Aid, Relief, and
Economic Security (CARES) Act, which will provide billions of dollars of relief
to individuals, businesses, state and local governments, and the health care
system suffering the impact of the pandemic, including mortgage loan forbearance
and modification programs to qualifying borrowers who have difficulty making
their loan payments. In late March 2020, Treasury Secretary Mnuchin formed a
task force to examine and recommend ways to address potential funding and
liquidity issues that could arise as a result of the forbearance and loan
modification programs, though there can be no assurance that the task force will
be successful in making recommendations that will address these issues or if any
such recommendations made will ultimately be implemented or successful or
beneficial to our business.
--------------------------------------------------------------------------------
There can be no assurance as to how, in the long term, these and other actions
by the U.S. government will affect the efficiency, liquidity and stability of
the financial and mortgage markets. To the extent the financial or mortgage
markets do not respond favorably to any of these actions, or such actions do not
function as intended, our business, results of operations and financial
condition may continue to be materially adversely affected.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.
Exhibit No. Description
First Amendment to the Management Agreement dated April 6, 2020 ,
10.1 by and between AG Mortgage Investment Trust, Inc. and AG REIT
Management, LLC
99.1 Press Release, dated April 8, 2020Forward-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," "could," "would," "should," "may", "expect" 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: our ability to accurately predict our outstanding
indebtedness and the status of our ongoing discussions with our financing
counterparties. 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, 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 Non-Agency RMBS and CMBS
securities, Excess MSRs and loans, our ability to predict and control costs,
conditions in the real estate market, legislative and regulatory changes that
could adversely affect the business of the Company, our ongoing negotiations
with our repurchase financing counterparties and the Manager and the ongoing
spread and economic effects of the novel coronavirus (COVID-19). Additional
information concerning these and other risk factors are contained in the
Company's filings with the Securities and Exchange Commission ("SEC"), including
our most recent Annual Report on Form 10-K and subsequent filings. All
information in this current report on Form 8-K is as of April 8, 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.
--------------------------------------------------------------------------------
© Edgar Online, source Glimpses
AG MORTGAGE INVESTMENT TRUST, INC. 
