Item 1.01. Entry in a Material Definitive Agreement.
On September 24, 2020, AG Mortgage Investment Trust, Inc. (the "Company") and AG
REIT Management, LLC (the "Manager"), the Company's external manager, executed
an amendment (the "Second 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 receive a
portion of the accrued base management fee provided by Section 7 of the
Management Agreement in shares of common stock, par value $0.01 per share, of
the Company (the "Common Stock"). As reported in a Current Report on Form 8-K
dated April 8, 2020, the Company and the Manager had previously amended the
Management Agreement to defer payment of the base management fee and
reimbursement of expenses that would otherwise have been payable through
September 30, 2020 (or such other time as the Company and the Manager agreed).
Pursuant to the Second Management Agreement Amendment, the Manager agreed to
accept, and the Company agreed to issue, (i) 1,215,370 shares of Common Stock in
full satisfaction of the deferred base management fee of $3.8 million payable by
the Company in respect of the first and second quarters of 2020 and (ii) 154,500
shares of Common Stock in full satisfaction of $0.5 million of the base
management fee payable by the Company in respect of the third quarter of 2020.
The shares to be issued represent approximately 3.94% of the Company's currently
outstanding Common Stock. The remaining base management fee for the third
quarter of 2020 and the reimbursement of expenses through September 30, 2020
will be paid in cash in the ordinary course pursuant to the Management
Agreement.
The Second Management Agreement Amendment and the stock issuance to the Manager
were approved by the independent Audit Committee of the Company's Board of
Directors. The shares of Common Stock issued to the Manager were valued at $3.15
per share based on the midpoint of the estimated range of the Company's book
value per share as of August 31, 2020 discussed in Item 7.01 below. The closing
price of the Company's Common Stock on the New York Stock Exchange on September
23, 2020, was $2.68 per share.
The above description of the terms of the Second Management Agreement Amendment
does not purport to be complete and is qualified in its entirety by the full
text of the Second Management Agreement Amendment attached as Exhibit 10.1
hereto and incorporated herein by reference.
Item 3.02 Unregistered Sales of Equity Securities.
The information set forth under Item 1.01 is incorporated herein by reference.
The Common Stock was issued to the Manager pursuant to an exemption from the
registration requirements of the Securities Act of 1933, as amended (the "Act"),
afforded by Section 4(a)(2) of the Act and Rule 506 promulgated thereunder.
Item 7.01 Regulation FD Disclosure.
The Company has elected to provide an update on its book value per share
calculation as of August 31, 2020. The Company's book value per share1 as of
August 31, 2020 is estimated to be in the range of $3.10 to $3.20.
The estimated range reflects the Company's estimates based on information
currently available to management. You should not place undue reliance on it.
These estimates were prepared by, and are the responsibility of, the Company's
management and are based upon a number of assumptions, including but not limited
to, the valuation of certain of its assets and the estimation of certain
expenses. Additional items that may require adjustments to these estimates may
be identified and could result in material changes to these estimates. The
Company undertakes no obligation to update this information.
1 Book value per share is calculated using (i) as the denominator, all
outstanding shares of Common Stock as of August 31, 2020 in accordance with U.S.
GAAP; and (ii) as the numerator, stockholders' equity less net proceeds of the
offerings of our 8.25% Series A Cumulative Redeemable Preferred Stock ($49.9
million) (the "Series A Preferred"), 8.00% Series B Cumulative Redeemable
Preferred Stock ($111.3 million) (the "Series B Preferred"), and 8.000% Series C
Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock ($111.2 million)
(the "Series C Preferred," together with the Series A Preferred and the Series B
Preferred, the "Preferred Stock"). As of September 17, 2020, the last scheduled
payment date on which dividend payments were not paid on the Preferred Stock,
the liquidation preference for the Series A Preferred, Series B Preferred and
Series C Preferred that remains outstanding following the Company's previously
announced exchange offer that expired on September 11, 2020 (the "Exchange
Offer") was $52.8 million ($26.03 per share), $118.8 million ($26.00 per share)
and $118.8 million ($26.00 per share), respectively. This includes accumulated
and unpaid dividends in the aggregate amount of $11.3 million, consisting of
$2.1 million for the Series A Preferred, $4.6 million for the Series B Preferred
and $4.6 million for the Series C Preferred. The accumulated and unpaid
dividends on the Company's Preferred Stock accrue without interest, and if (as
is currently the case) dividends on the Company's Preferred Stock are in
arrears, the Company cannot pay cash dividends with respect to its Common Stock.
For the avoidance of doubt, the August 31, 2020 book value per share calculation
does not include any accrual of accumulated, unpaid, or undeclared dividends on
our Preferred Stock. It also does not include the impact of the issuance of
Common Stock to the Manager described in Item 1.01 above or the issuance of a
total of 516,300 shares of Common Stock pursuant to the Exchange Offer, which
occurred after August 31, 2020 and were not material to the calculation.
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Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
Exhibit No. Description
10.1 Second Amendment to the Management Agreement, dated September 24, 2020, by
and between AG Mortgage Investment Trust, Inc. and AG REIT Management, LLC
104 Cover Page Interactive Data File (formatted as Inline XBRL)
FORWARD LOOKING STATEMENTS
This Current Report on Form 8-K includes "forward-looking statements" within the
meaning of the safe harbor provisions of the United States Private Securities
Litigation Reform Act of 1995. 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 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 the yield
curve, changes in prepayment rates on the loans we own that underlie our
investment securities, increases in default rates or delinquencies and/or
decreased recovery rates on our assets, our ability to make distributions to our
stockholders in the future, our ability to maintain our qualification as a REIT
for federal tax purposes, our ability to qualify for an exemption from
registration under the Investment Company Act of 1940, as amended, prior to the
expiration of our one year grace period, the availability and terms of
financing, changes in the fair value of our assets, including negative changes
resulting in margin calls relating to the financing of our assets, changes in
general economic conditions, in our industry and in the finance and real estate
markets, including the impact on the value of our assets, conditions in the
market for Agency mortgage-backed securities, Non-Agency residential
mortgage-backed securities and commercial mortgage-backed securities, excess
mortgage servicing rights and loans, conditions in the real estate market,
legislative and regulatory actions by the U.S. Department of the Treasury, the
Federal Reserve and other agencies and instrumentalities in response to the
economic effects of the novel coronavirus (COVID-19) pandemic that could
adversely affect the business of the Company, the forbearance program included
in the Coronavirus Aid, Relief, and Economic Security Act and the ongoing spread
and economic effects of 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 its most recent Annual Report on Form
10-K and subsequent filings, including its Quarterly Report on Form 10-Q for the
three months ended June 30, 2020. Copies are available free of charge on the
SEC's website, http://www.sec.gov/. All information in this Current Report on
Form 8-K is as of September 24, 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.
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