READY CAPITAL CORPORATION Item 8.01. Other Events.
Litigation Related to the Merger
As previously disclosed, onFebruary 26, 2023 ,Ready Capital Corporation , aMaryland corporation (the "Company" or "Ready Capital "), Broadmark Realty Capital Inc., aMaryland corporation ("Broadmark"), andRCC Merger Sub, LLC , aDelaware limited liability company and a wholly owned subsidiary of the Company ("Merger Sub"), entered into an Agreement and Plan of Merger (the "Merger Agreement"), pursuant to which, subject to the terms and conditions therein, Broadmark will be merged with and into Merger Sub, with Merger Sub continuing as the surviving company (the "Merger"). Beginning onMarch 29, 2023 , six different complaints were filed in theUnited States District Court for the Southern District of New York captioned O'Dell v. Broadmark Realty Capital Inc., et al., Case No. 1:23-cv-02640, Wang v. Broadmark Realty Capital Inc., et al., Case No. 1:23-cv-02717, Kirkland v. Broadmark Realty Capital Inc., et al., Case No. 1:23-cv-02943, Kirsteins v. Broadmark Realty Capital Inc., et al., Case No. 1:23-cv-03008, Morgan v. Broadmark Realty Capital Inc., et al., Case No. 1:23-cv-03850, and Lawrence v. Broadmark Realty Capital Inc., et al., Case No. 1:23-cv-03921. The complaints, each filed as an individual action by a purported stockholder of Broadmark, name Broadmark and its directors as defendants. The complaints generally allege that the defendants violated Sections 14(a) and 20(a) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), with respect to the Form S-4 filed with theUnited States Securities and Exchange Commission (the "SEC") in connection with the Merger, and seek to enjoin the Merger, as well as damages, costs and attorneys' and experts' fees. OnApril 3, 2023 , a purported stockholder of the Company filed a complaint, captioned Whitehead v.Ready Capital Corporation , et al., Case No. 1:23-cv-02773, in theUnited States District Court for the Southern District of New York . The complaint, which is filed as an individual action, named the Company and its directors as defendants and, like the other complaints, alleges violations of Section 14(a) and 20(a) of the Exchange Act. The complaint was voluntarily dismissed onMay 16, 2023 . The Company and Broadmark have also received correspondence from law firms claiming to represent purported stockholders, either threatening litigation or making other demands relating to the Merger, including that additional disclosures be provided. The Company and Broadmark have not yet responded to any of these complaints. In order to moot the plaintiffs' disclosure claims, alleviate the costs, risks and uncertainties inherent in litigation and provide additional information to their respective stockholders, the Company and Broadmark have determined to voluntarily supplement the joint proxy statement/prospectus as described in this Current Report on Form 8-K. Nothing in this Current Report on Form 8-K shall be deemed an admission of the legal necessity or materiality under applicable laws of any of the disclosures set forth herein. To the contrary, the Company and Broadmark specifically deny all allegations by the plaintiffs that any additional disclosure was or is required. These supplemental disclosures will not change the merger consideration to be received by Broadmark stockholders in connection with the Merger or the timing of the special meeting of Company stockholders (the "Special Meeting") to be held solely by means of remote communication live over the Internet at www.meetnow.global/M5HHNH5 onMay 30, 2023 at9:00 a.m., Eastern Time . The Company's board of directors continues to unanimously recommend that you vote "FOR" the proposals to be voted on at the Special Meeting described in the
joint proxy statement/prospectus. Supplemental Disclosures
The following disclosures supplement the disclosures contained in the joint proxy statement/prospectus, as applicable, and should be read in conjunction with the disclosures contained in the joint proxy statement/prospectus, which should be read in its entirety. To the extent the information set forth herein differs from or updates information contained in the joint proxy statement/prospectus, the information set forth herein shall supersede or supplement the information in the joint proxy statement/prospectus. The terms used below, unless otherwise defined, have the meanings set forth in the joint proxy statement/prospectus.
The disclosure in the section entitled "The Merger - Background of the Merger" on pages 67 through 77 of the joint proxy statement/prospectus is hereby supplemented by amending and restating the fourth full paragraph on page 70 as follows (with new text underlined): OnDecember 16, 2022 ,Broadmark andReady Capital executed a mutual non-disclosure agreement, which included customary one-year standstills and employee non-solicits applicable to each party. Under the standstill provision, each of the parties would be permitted to make private proposals to acquire the other following the entry of the other into a definitive written agreement to engage in a change of control transaction. The only other non-disclosure agreement that remained in effect at this time was the agreement with Party B. As noted above, the mutual non-disclosure agreement with Party B did not contain a standstill provision or other similar restriction on making subsequent proposals for any type of transaction with Broadmark. The disclosure in the section entitled "Opinion of Broadmark's Financial Advisor - Opinion ofJ.P. Morgan Securities LLC - Public Trading Multiples" on pages 87 and 88 of the joint proxy statement/prospectus is hereby supplemented by amending and restating the fourth and fifth full paragraphs on page 87 and the bullet point list spanning pages 87 and 88 as follows (with new text underlined): Using publicly available information, J.P. Morgan compared selected financial data ofBroadmark andReady Capital with similar data for certain selected publicly traded companies engaged in businesses which J.P. Morgan judged to be sufficiently analogous to those engaged in byBroadmark andReady Capital , respectively, based on J.P. Morgan's experience and its familiarity with the industries in whichBroadmark andReady Capital operate. The following table lists the companies selected by J.P. Morgan with respect toBroadmark andReady Capital and sets forth the P/TBV and 2023E dividend yield for each selected
company:
2023E
P/TBV Dividend Yield
Apollo Commercial Real Estate Finance 0.73 x 12.1 %
Arbor Realty Trust 0.94 x 10.5 %
Ares Commercial Real Estate 0.84 x 12.1 %
Blackstone Mortgage Trust 0.82 x 10.4 %
BrightSpire Capital 0.64 x 10.8 %
Broadmark 0.60 x 10.0 %
Claros Mortgage Trust 0.78 x 10.5 %
KKR Real Estate Finance Trust 0.65 x 11.7 %
Ladder Capital Corp 0.88 x 8.1 %
Ready Capital 0.86 x 12.8 %
Starwood Property Trust 0.94 x 9.9 %
TPG RE Finance Trust, Inc. 0.51 x 11.1 %
The disclosure in the section entitled "Opinion of Broadmark's Financial Advisor
- Opinion of J.P. Morgan Securities LLC - Public Trading Multiples" on pages 87
and 88 of the joint proxy statement/prospectus is hereby supplemented by
amending and restating the third full paragraph on page 88 as follows (withnew text underlined): Based on the results of this analysis, J.P. Morgan derived the following reference ranges for P/TBV and 2023E Dividend Yield, which ranges were selected based on factors J.P. Morgan considered appropriate based on its experience
and professional judgment: The disclosure in the section entitled "Opinion of Broadmark's Financial Advisor - Opinion ofJ.P. Morgan Securities LLC - Broadmark Dividend Discount Analysis" on page 89 of the joint proxy statement/prospectus is hereby supplemented by amending and restating the second and third bullet points following the first full paragraph on page 89 as follows (with new text underlined): · a terminal value based on 2026 estimated tangible book value (which was based on the Broadmark's financial forecasts prepared by Broadmark management) and a terminal multiple range of 0.50x to 0.95x, which range was selected by J.P. Morgan based on factors J.P. Morgan considered appropriate based on its experience and professional judgment; and
· a cost of equity range of 13.50% to 14.50%, which range was selected by J.P. Morgan based on factors J.P. Morgan considered appropriate based on its experience and professional judgment.
The disclosure in the section entitled "Opinion of Broadmark's Financial Advisor
- Opinion of
· a terminal value based on 2026 estimated tangible book value (which was based on theReady Capital's financial forecasts prepared byReady Capital management) and a terminal multiple range of 0.50x to 0.95x, which range was selected by J.P. Morgan based on factors J.P. Morgan considered appropriate based on its experience and professional judgment; and
· a cost of equity range of 13.00% to 14.00%, which range was selected by J.P. Morgan based on factors J.P. Morgan considered appropriate based on its experience and professional judgment.
The disclosure in the section entitled "Opinion of Broadmark's Financial Advisor - Opinion ofJ.P. Morgan Securities LLC - Discounted Cash Flow-Based Value Creation Analysis" on page 90 of the joint proxy statement/prospectus is hereby supplemented by amending and restating the second full paragraph on page 90 as follows (with new text underlined): J.P. Morgan calculated the pro forma combined company implied equity value per share by (i) calculating the sum of (a) the implied equity value of Broadmark on a stand-alone basis of approximately$610 million , using the midpoint value determined in J.P. Morgan's discounted dividend analysis of Broadmark described above, (b) the implied equity value ofReady Capital on a stand-alone basis of approximately$1.405 billion , using the midpoint value determined in J.P. Morgan's discounted dividend analysis ofReady Capital described above, and (c) 100% of the estimated present value of the run-rate cost synergies of$3 million , as reflected in estimates Broadmark's management provided to J.P. Morgan for use in connection with its analysis, (ii) subtracting estimated transaction expenses of$22 million provided by Broadmark's management to J.P. Morgan for use in connection with its analysis, applying the midpoint of a terminal growth rate range of 2.25% to 2.75% and discounted to present value using the midpoint of a discount rate range of 10.50% to 11.50% (which ranges, in each case, were selected by J.P. Morgan based on factors J.P. Morgan considered appropriate based on its experience and professional judgment)and (iii) multiplying such result by the pro forma equity ownership of the combined company by holders of Broadmark Common Stock of 36.1%. This analysis indicated, on an illustrative basis, an implied equity value of$720 million for the ownership of holders of Broadmark Common Stock in the pro forma combined company, which represented accretion in value to such holders of$110 million or 18.0% as compared to the standalone implied equity value of Broadmark of$610 million . There can be no assurance, however, that the synergies, transaction-related expenses and other impacts referred to above will not be substantially greater or less than those estimated by Broadmark's management and described above. The disclosure in the section entitled "Opinion of Broadmark's Financial Advisor - Opinion ofJ.P. Morgan Securities LLC - Other Analyses and Information - Selected Transaction Multiples Analysis" on page 91 of the joint proxy statement/prospectus is hereby supplemented by amending and restating the first full paragraph, table and second full paragraph on page 91 as follows (with
new
text underlined):
Using publicly available information, J.P. Morgan reviewed selected transactions
involving businesses that, for purposes of J.P. Morgan's analysis, were
considered similar to Broadmark's business based on J.P. Morgan's experience and
its familiarity with the industries in which Broadmark operates. The
transactions selected by J.P. Morgan for its analysis, and the P/TBV multiple
for each transaction, were as follows:
Announcement
Date Acquiror Target P/TBV
July 26, 2021 Franklin BSP Realty Trust Capstead Mortgage Corp. 1.16 x
Anworth Mortgage Asset
December 7, 2020 Ready Capital Corp. 0.97 x
November 7, 2018 Ready Capital Owens Realty Mortgage 0.96 x
May 2, 2018 Annaly Capital Management MTGE Investment Corp. 1.00 x
April 26, 2018 Two Harbors CYS Investments 1.05 x
April 11, 2016 Annaly Capital Management Hatteras Financial Corp. 0.85 x
Javelin Mortgage Investment
March 2, 2016 ARMOUR Residential REIT Corp. 0.87 x
February 26, 2016 Apollo Commercial Real Estate Finance Apollo Residential Mortgage 0.89 x
With respect to each selected transaction above, J.P. Morgan calculated and compared P/TBV based on publicly available information. Based on the results of this analysis, J.P. Morgan derived the reference range for P/TBV of 0.85x - 1.15x, which range was selected by J.P. Morgan based on factors which J.P. Morgan considered appropriate based on its experience and professional judgment. J.P. Morgan then applied the P/TBV multiple reference range to Broadmark's tangible book value per share as ofDecember 31, 2022 of$6.96 . Broadmark's estimated tangible book value per share was based on financial forecasts for Broadmark prepared by Broadmark. The disclosure in the section entitled "Opinion of Broadmark's Financial Advisor - Opinion ofJ.P. Morgan Securities LLC - Other Analyses and Information - Other Information" on page 91 of the joint proxy statement/prospectus is hereby supplemented by amending and restating the second bullet point following the fifth full paragraph on page 91 as follows (with new text underlined): · analyst share price targets forBroadmark Common Stock and Ready Capital Common Stock in certain recently published, publicly available research analysts' reports from FactSet, with share price targets ranging from$3.75 to$5.00 for Broadmark and$13.00 to$16.00 forReady Capital and the implied exchange ratios of 0.234x and 0.385x derived from a comparison of the lowest share price target for Broadmark to the highest share price target forReady Capital and a comparison of the highest share price target for Broadmark to the lowest share price target forReady Capital , respectively.
The disclosure in the section entitled "Opinion ofReady Capital's Financial Advisor - Broadmark Financial Analyses - Broadmark Selected Public Companies Analysis" on pages 95 and 96 of the joint proxy statement/prospectus is hereby supplemented by amending the first and second full paragraphs/bullet point list on page 96 as follows (with new text underlined):
The companies selected by
Internally Managed · Ladder Capital Corp. · MFA Financial, Inc.
· New York Mortgage Trust, Inc.
· BrightSpire Capital, Inc. · Redwood Trust, Inc.
· Granite Point Mortgage Trust, Inc.
Externally Managed ·Ready Capital Corporation · Ellington Financial Inc. Corporation · Velocity Financial, Inc.
Using publicly available information,Wells Fargo Securities calculated the multiple of each selected company's trading price per share of common stock as ofFebruary 24, 2023 to such selected company's adjusted fully diluted tangible book value per share of common stock as ofDecember 31, 2022 ("Fully Diluted Price / TBV"), as well as each selected company's dividend yield (calculated as annualized dividends per share of common stock for such selected company's most recently completed fiscal quarter as a percentage of such selected company's trading price per share of common stock as ofFebruary 24, 2023 ) ("Dividend Yield"). The Fully Diluted Price / TBV and the Dividend Yield for each of those companies were as follows: Company Fully Diluted Price / TBV Dividend Yield Ladder Capital Corp. 1.18 x 8.1 % MFA Financial, Inc. 0.78 x 12.9 %
New York Mortgage Trust, Inc. 0.77 x
15.2 %
BrightSpire Capital, Inc. 0.79 x 10.8 %
Redwood Trust, Inc. 0.90 x 12.1 %Granite Point Mortgage Trust, Inc. 0.33 x
13.3 %
Ready Capital Corporation* - 12.8 %
Ellington Financial Inc. 0.87 x 13.7 %
Velocity Financial, Inc.* - N/A
* Had not yet reported Q4 2022 by
The disclosure in the section entitled "Opinion ofReady Capital's Financial Advisor - Broadmark Financial Analyses - Broadmark Precedent Transactions Analysis" on pages 96 and 97 of the joint proxy statement/prospectus is hereby supplemented by amending and restating the third full paragraph on page 97 as follows (with new text underlined): Using publicly available information,Wells Fargo Securities calculated, for each of the selected transactions, the ratio of the target company's implied equity value in such transaction to the target company's tangible book value ("EV / TBV"). The EV / TBV for each transaction were as follows: Date EV / Announced Target Acquiror TBV
0.85 x
Benefit Street Partners
07/26/2021 Capstead Mortgage Corporation Realty Trust, Inc. 1.16 x
12/06/2020 Anworth Mortgage Asset Corporation Ready Capital Corp. 0.94 x
08/03/2020 Jernigan Capital, Inc. NexPoint Advisors LP 1.07 x
11/07/2018 Owens Realty Mortgage, Inc. Ready Capital Corp. 0.94 x
05/02/2018 MTGE Investment Corp. Annaly Capital Management 0.99 x
04/26/2018 CYS Investments Two Harbors Investment Corp. 1.05 x
04/11/2016 Hatteras Financial Corp. Annaly Capital Management 0.85 x
Sutherland Asset Management
04/07/2016 ZAIS Financial Corp. Corp. 1.03 x
Apollo Commercial Real Estate
02/26/2016 Apollo Residential Mortgage, Inc. Finance, Inc.
0.89 x
Taking into account the results of the selected transaction analysis,
The disclosure in the section entitled "Opinion ofReady Capital's Financial Advisor - Broadmark Financial Analyses - Broadmark Dividend Discount Analysis - Broadmark Standalone" on pages 97 and 98 of the joint proxy statement/prospectus is hereby supplemented by amending and restating the last full paragraph on page 97 as follows (with new text underlined):Wells Fargo Securities performed a dividend discount analysis for Broadmark for the purpose of determining an implied equity value per share for Broadmark Common Stock on a standalone basis.Wells Fargo Securities calculated Broadmark's projected dividends on shares of Broadmark Common Stock for the period fromMarch 1, 2023 throughDecember 31, 2027 , based on the Broadmark Projections (as described in more detail under the section titled "Certain Broadmark Unaudited Prospective Financial Information" beginning on page 103 of this joint proxy statement / prospectus), which were discussed with, and approved by, theReady Capital Board for use byWells Fargo Securities in connection with its financial analyses.Wells Fargo Securities also calculated a range of terminal values for Broadmark as ofDecember 31, 2027 by applying a range of terminal forward multiples of 0.75x to 0.90x to Broadmark's projected tangible book value per share as ofDecember 31, 2027 which projected tangible book value per share was based on the Broadmark Projections and was prepared by the management ofReady Capital and approved by theReady Capital Board for use byWells Fargo Securities in connection with its financial analyses (as described in more detail under the section titled "-Certain Ready Capital Unaudited Prospective Financial Information" beginning on page 100 of this joint proxy statement / prospectus).Wells Fargo Securities then discounted the projected dividend estimates and the range of the terminal values to present value as ofFebruary 28, 2023 using discount rates ranging from 10.00% to 14.50%, which range was chosen byWells Fargo Securities based upon an analysis of the cost of equity of Broadmark and Wells Fargo's professional judgment
and experience. The disclosure in the section entitled "Opinion ofReady Capital's Financial Advisor - Broadmark Financial Analyses - Broadmark Dividend Discount Analysis - Broadmark Cost Synergy Analysis" on page 98 of the joint proxy statement/prospectus is hereby supplemented by amending and restating the second full paragraph on page 98 as follows (with new text underlined):Wells Fargo Securities performed a discounted cash flow analysis for the purpose of determining an implied equity value per share for Broadmark Common Stock giving effect to the projected cost savings from the Merger's synergies.Wells Fargo Securities calculated the projected operating expense savings and total expense savings estimated to be realized in the Merger for the period fromJune 30, 2023 toDecember 31, 2026 , based on the Synergies, which were prepared by the management ofReady Capital and approved by theReady Capital Board for use byWells Fargo Securities in connection with its financial analyses.Wells Fargo Securities also calculated an estimate of the terminal value of the Synergies as ofDecember 31, 2026 , assuming no perpetuity growth rate in the Synergies.Wells Fargo Securities then discounted the Synergies and the terminal value of the Synergies to present value as ofFebruary 28, 2023 using discount rates ranging from 10.00% to 14.50%, which range was chosen byWells Fargo Securities based upon an analysis of the cost of equity of Broadmark and WellsFargo's professional judgment and experience. The results of this analysis indicated an implied value of the Synergies per share of Broadmark Common Stock of$0.68 to$1.06 . The disclosure in the section entitled "Opinion ofReady Capital's Financial Advisor - Ready Capital Financial Analysis - Ready Capital Selected Public Companies Analysis" on pages 98 and 99 of the joint proxy statement/prospectus is hereby supplemented by amending and restating the sixth and seventh full paragraphs/bullet point list on page 98 as follows (with new text underlined):
The companies selected by
· Starwood Property Trust, Inc.
· Blackstone Mortgage Trust, Inc.
· Arbor Realty Trust, Inc.
· Apollo Commercial Real Estate Finance, Inc.
· KKR Real Estate Finance Trust, Inc.
· Ares Commercial Real Estate Corporation
Using publicly available information,Wells Fargo Securities calculated the multiple of each selected company's trading price per share of common stock as ofFebruary 24, 2023 to such selected company's Fully Diluted Price / TBV, as well as each selected company's Dividend Yield. The Fully Diluted Price / TBV and the Dividend Yield for each of those companies were as follows: Company Fully Diluted Price / TBV Dividend Yield Starwood Property Trust, Inc. 0.96 x 9.9 %
Blackstone Mortgage Trust, Inc. 0.82 x 11.5 % Arbor Realty Trust, Inc. 1.26 x 10.5 % Apollo Commercial Real Estate Finance, Inc. 0.76 x 12.1 % KKR Real Estate Finance Trust, Inc. 0.82 x 11.7 % Ares Commercial Real Estate Corporation
0.85 x 12.1 % The disclosure in the section entitled "Opinion ofReady Capital's Financial Advisor - Ready Capital Financial Analysis - Ready Capital Dividend Discount Analysis" on page 99 of the joint proxy statement/prospectus is hereby supplemented by amending and restating the first full paragraph on page 99 as follows (with new text underlined):Wells Fargo Securities performed a dividend discount analysis forReady Capital for the purpose of determining an implied equity value per share for Ready Capital Common Stock.Wells Fargo Securities calculatedReady Capital's projected dividends on shares of Ready Capital Common Stock for the period fromMarch 1, 2023 throughDecember 31, 2026 , based on the Ready Capital Projections (as described in more detail under the section titled "Certain Ready Capital Unaudited Prospective Financial Information" beginning on page 100 of this joint proxy statement / prospectus), which were discussed with, and approved by, theReady Capital Board for use byWells Fargo Securities in connection with its financial analyses.Wells Fargo Securities also calculated a range of terminal values forReady Capital as ofDecember 31, 2026 by applying a range of terminal forward multiples of 0.75x to 0.95x toReady Capital's projected tangible book value per share as ofDecember 31, 2026 based on the Ready Capital Projections.Wells Fargo Securities then discounted the projected dividend estimates and the range of terminal values to present value as ofFebruary 28, 2023 using discount rates ranging from 10.00% to 14.50%, which range was chosen byWells Fargo Securities based upon an analysis of the cost of equity ofReady Capital and Wells Fargo's professional judgment and experience.
The disclosure in the section entitled "Certain Ready Capital Unaudited Prospective Financial Information - Ready Capital Projections" on page 102 of the joint proxy statement/prospectus is hereby supplemented by adding a footnote (2) to the table at the bottom of page 102 as follows (with new text underlined): (2) As described under "Discounted Cash Flow-Based Valuation Creation Analysis" on page 90 of this joint proxy statement/prospectus, for purposes of such analysis J.P. Morgan used, among other financial information, the midpoint value determined in J.P. Morgan's discounted dividend analysis ofReady Capital described under "Ready Capital Dividend Discount Analysis" on page 89 of this joint proxy statement/prospectus, which J.P. Morgan calculated based on, among other financial information, the Dividends Per Share estimates set forth above and not cash flows. The disclosure in the section entitled "Certain Broadmark Unaudited Prospective Financial Information - Broadmark Projections" on pages 104 and 105 of the joint . . .
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