Item 1.01. Entry into a Material Definitive Agreement.
The Warrants
On
June 26, 2020 (the “Closing Date”), MFA Financial, Inc. (the “Company”) completed the previously
announced issuance of warrants (“Warrants”) to purchase, in the aggregate, 37,039,106 shares (subject to adjustment
in accordance with their terms) of the common stock, par value $0.01 per share, of the Company (the “Common Stock”),
pursuant to the terms of the Investment Agreement, dated June 15, 2020 (the “Investment Agreement”),
by and among the Company, Omaha Equity Aggregator, L.P. (the “Apollo Purchaser”) and Athene USA Corporation
(the “Athene USA Purchaser” and together with the Apollo Purchaser, the “Purchasers” and
each a “Purchaser”).
The Warrants to be issued
pursuant to the Investment Agreement were allocated among and issued at the Closing Date to the Purchasers and their affiliates
as follows:
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Warrants
to purchase 11,111,732 shares of Common Stock were issued to the Apollo Purchaser at
an initial exercise price of $1.66 (the closing
price of the Common Stock on May 22, 2020 (the last closing price per share immediately
preceding execution of the term sheet between the Company and Apollo Management Holdings
L.P. relating to, among other matters, the transactions described in this Form 8-K)),
subject to adjustment, and for 11,111,732 shares of Common Stock at an initial exercise
price of $2.08 (125% of the closing price per share
of the Common Stock on May 22, 2020), subject to adjustment.
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Warrants
to purchase 1,481,564 shares of Common Stock were issued to Athene Annuity & Life
Assurance Company (“Athene Annuity and Life Assurance Assignee”) at
an initial exercise price of $1.66, subject to adjustment, and for 1,481,564 shares of
Common Stock at an initial exercise price of $2.08, subject to adjustment.
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Warrants
to purchase 5,926,257 shares of Common Stock were issued to Athene Annuity & Life
Company (“Athene Annuity and Life Assignee” and together with Athene
Annuity and Life Assurance Assignee, the “Assignees”) at an initial
exercise price of $1.66, subject to adjustment, and for 5,926,257 shares of Common Stock
at an initial exercise price of $2.08, subject to adjustment.
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Registration Rights Agreement
Pursuant
to the Investment Agreement, on the Closing Date, the Company, the Purchasers and the Assignees entered into a registration
rights agreement (the “Registration Rights Agreement”), pursuant to which the Purchasers and the Assignees
are entitled to customary registration rights with respect to the shares of Common Stock the Purchasers or their affiliates
have agreed to purchase in open market or privately negotiated transactions pursuant to the terms of the Investment Agreement and
shares of Common Stock for which the Warrants may be exercised. Under the terms of the
Registration Rights Agreement, the Company is required to prepare and file a resale registration statement with the
Securities and Exchange Commission within 90 calendar days following the Closing Date with respect to the Registrable
Securities (as defined in the Registration Rights Agreement). The Purchasers and their transferees are entitled to customary
underwritten offering, piggyback and demand registration rights with respect to the Registrable Securities.
The
descriptions of the Warrants and Registration Rights Agreement do not purport to be complete and are qualified in their entirety
by reference to the forms of the Warrants and Registration Rights Agreement filed herewith as exhibits to this Current Report
on Form 8-K and incorporated herein by reference.
Reinstatement Agreement
In connection with the closing of the transactions
discussed above, as well as certain financing transactions previously reported by the Company, on June 26, 2020, the Company and
certain counterparties (the “Participating Counterparties”) holding a significant majority of its outstanding
repurchase obligations entered into a reinstatement agreement (the “Reinstatement Agreement”), pursuant to
which the Company and the Participating Counterparties agreed to terminate the Third Forbearance Agreement (as defined in the
Current Report on Form 8-K filed by the Company with the SEC on June 3, 2020), and each Participating Counterparty agreed to permanently
waive existing and prior events of default identified therein under its repurchase agreements (“Repo Agreements”)
with the Company and to reinstate each Repo Agreement (with certain modifications, as discussed below). (The Company entered into
a separate agreement with a non-Participating Counterparty pursuant to which the Company’s outstanding repurchase obligations
with such counterparty were fully satisfied and the repurchase agreement with such counterparty was terminated). Pursuant to the
Reinstatement Agreement and termination of the Third Forbearance Agreement, the Company exited forbearance with its Repo Agreement
counterparties.
As a result of entering into the Reinstatement Agreement, default
interest on the Company’s outstanding borrowings under each Repo Agreement ceased to accrue as of June 26, 2020, and as
of such date, the interest rate under each applicable Repo Agreement reverted to the non-default rate of interest or pricing rate,
as set forth therein, all cash margin will be applied to outstanding balances owed by the Company, and principal and interest
payments on the underlying collateral will be permitted to flow to and be used by the Company, in substantively and substantially
the same manner as was in place prior to the Company’s entering forbearance. In addition, pursuant to the terms of the Reinstatement
Agreement, (i) the security interests granted to Participating Counterparties as additional collateral during the forbearance
term were terminated and released; and (ii) the Repo Agreements are now subject to a set of overriding terms, including set-off
and cross-default provisions.