Item 2.04. Triggering Events That Accelerate or Increase a Direct Financial
Obligation or an Obligation under an Off-Balance Sheet Arrangement.
In recent weeks, due to the turmoil in the financial markets resulting from the
global pandemic of the COVID-19 virus, MFA Financial, Inc. and its subsidiaries
(collectively, the "Company") have received an unusually high number of margin
calls from financing counterparties, and have also experienced higher funding
costs in respect of its repurchase agreements. At the close of business on March
23, 2020, the Company did not meet its margin calls. Further, on March 23, 2020,
the Company notified its financing counterparties that it does 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. The Company estimates that, as of March 20,
2020, the Company's aggregate obligations under its various financing
arrangements was approximately $9.5 billion.
In light of the events and conditions described above, the Company is engaged in
discussions with its financing counterparties with regard to entering into
forbearance agreements pursuant to which each 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 cannot predict whether its financing counterparties will enter into
a forbearance agreement, the timing of any such agreement, or the terms thereof.
Under the terms of the Company's financing arrangements, if the Company fails to
deliver additional collateral or otherwise meet margin calls when due, the
counterparties may demand immediate payment by the Company of its aggregate
outstanding financing obligations and/or take ownership of the securities
securing the Company's financing obligations.
The Company has engaged Hunton Andrews Kurth LLP and Quinn Emanuel Urquhart &
Sullivan, LLP as legal counsel and FTI LLC as financial advisor in connection
with its financings and related matters.
Item 8.01. Other Events.
On March 24, 2020, the Company issued a press release announcing the status of
its financing agreements, which is discussed in Item 2.04 above and incorporated
herein by reference.
On March 25, 2020 the Company issued a press release announcing that it is
revoking its previously announced first quarter 2020 quarterly cash dividends on
each of the Company's common stock and 7.50% Series B Cumulative Redeemable
Preferred Stock (the "Series B Preferred Stock").
The quarterly cash dividend of $0.20 per share on the Company's common stock had
been declared on March 11, 2020, and was to be paid on April 30, 2020, to all
stockholders of record as of the close of business March 31, 2020. The Series B
Preferred Stock dividend of $0.46875 per share had been declared on February 14,
2020, and was to be paid on March 31, 2020, to stockholders of record as of the
close of business March 2, 2020.
Unpaid dividends on the Company's Series B Preferred Stock shall accrue without
interest. No dividends may be paid or set apart on shares of the Company's
common stock unless full cumulative dividends on the Series B Preferred Stock
for all past dividend periods that have ended have been or contemporaneously are
paid in cash, or a sum sufficient for such payment is set apart for payment.
The Company will continue to monitor market conditions and the potential impact
the ongoing volatility and uncertainty may have on its business. Related
thereto, the Company's Board of Directors will continue to evaluate the payment
of dividends as market conditions evolve. A copy of the press release is
attached hereto as Exhibit 99.1 and is incorporated herein by reference.
Item 9.01. Financial Statements and Exhibits.
Exhibit No. Description
99.1 Press Release, dated March 24, 2020
99.2 Press Release, dated March 25, 2020
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. 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, the Company's ability to
accurately estimate its outstanding borrowings under its financing arrangements,
uncertainties related to negotiations with the Company's financing
counterparties including with respect to any forbearance agreement, the timing
of any such agreement or the terms thereof, 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 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, 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 March 26, 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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