PennyMac Financial Services, Inc. (NYSE:PFSI) Files An 8-K Entry into a Material Definitive AgreementItem 1.01Entry into a Material Definitive Agreement.
Repurchase Agreement with Bank of America
On October 29, 2018, PennyMac Financial Services, Inc. (the “Company”), through two of its indirect controlled subsidiaries, PennyMac Loan Services, LLC (“PLS”) and Private National Mortgage Acceptance Company, LLC (“PNMAC”), entered into an Amended and Restated Master Repurchase Agreement, by and among Bank of America, N.A., as buyer (“BANA”), as administrative agent, swing line provider, sole lead arranger, sole bookrunner and a buyer, Capital One, National Association, as a buyer, The Bank of New York Mellon, as a buyer (collectively, the “Syndicated Buyers”),PLS, as seller, and PNMAC, as guarantor(the “Syndicated Repurchase Agreement”). The Syndicated Repurchase Agreement amends and restates the terms of that certain master repurchase agreement, dated as of March 17, 2011, by and among BANA,PLS, and PNMAC. to the terms of the Syndicated Repurchase Agreement, PLS may sell to, and later repurchase from, the Syndicated Buyers certainnewly originated mortgage loans that are originated by PLS or purchased by it from correspondent sellers through a subsidiary ofPennyMac Mortgage Investment Trust (NYSE: PMT) and, in either case, held by PLS pending sale and/or securitization. The obligations of PLS under the Syndicated Repurchase Agreement are fully guaranteed by PNMAC and the mortgage loans are serviced by PLS. The scheduled termination date of the Syndicated Repurchase Agreement is October 28, 2019.
Each Syndicated Buyer has severally committed to enter into transactions up to such Syndicated Buyer’s committed amount as set forth in the Syndicated Repurchase Agreement, with a maximum aggregate committed principal amountavailable to PLS for purchases of $500 million.
The principal amount paid by BANA, as administrative agent for the Syndicated Buyers, for each eligible mortgage loan is based upon a percentage of the leastof the market value of, the unpaid principal balance of, the purchase price paid by PLS for, or the takeout commitment price offered to PLS for, the mortgage loan. Upon the repurchase of a mortgage loan, PLS is required to repay BANA, as administrative agent for the Syndicated Buyers, the principal amount related to such mortgage loan plus accrued interest (at a rate reflective of the current market and based on LIBOR plus a margin) to the date of such repurchase. The Company, through PLS, is required to pay BANA, as administrative agent for the Syndicated Buyers,a commitment fee, as well as certain other administrative costs and expenses associated with the Syndicated Repurchase Agreement.
The Syndicated Repurchase Agreement contains margin call provisions that provide BANA, as administrative agent for the Syndicated Buyers, with certain rights in the event of a decline in the market value of the purchased mortgage loans. Under these provisions, BANA, as administrative agent for the Syndicated Buyers, may require PLS to transfer cash and/or additional eligible mortgage loans with an aggregate market value sufficient to eliminate any margin deficit resulting from such decline.
The Repurchase Agreement also requiresPLS to make certain representations and warranties and to maintain various financial and other covenants, whichinclude maintaining (i)a minimum tangible net worth at all times greater than or equal to $500 million; (ii)a minimum in unrestricted cash and cash equivalents at all times greater than or equal to $40 million; and (iii)a ratio of total liabilitiesto tangible net worth at all times less than or equal to 10:1.In order to enter new transactions, PLS must also maintain profitability of no less than $1.00 in any calendar quarter.
In addition, the Syndicated Repurchase Agreement containsevents of default (subject to certain materiality thresholds and grace periods), including payment defaults, breaches of covenants and/or certain representations and warranties, cross-defaults, guarantor defaults, material adverse changes, bankruptcy or insolvency proceedings and other events of default customary for this type of transaction. The remedies for such events of default are also customary for this type of transaction and include the acceleration of the principal amount outstanding under the Syndicated Repurchase Agreement and the liquidation by BANA as administrative agent for the Syndicated Buyers of the mortgage loans then subject to the Repurchase Agreement.
The foregoing descriptions of the Syndicated Repurchase Agreement and the related guaranty do not purport to be complete and are qualified in their entirety by reference to the full text of such agreements, which have been filed with this Current Report on Form 8-Kas Exhibits10.1 and Exhibit 10.2, respectively.