PennyMac Mortgage Investment Trust (NYSE:PMT) Files An 8-K Entry into a Material Definitive AgreementItem 1.01Entry into a Material Definitive Agreement.
On August 18, 2017, PennyMac Mortgage Investment Trust (the “Company”), through its wholly-owned subsidiary, PennyMac Corp. (“PMC”), entered into a Master Repurchase Agreement by and amongDeutsche Bank AG, Cayman Islands Branch (“Deutsche Bank”)and PMC (the “Repurchase Agreement”), to which PMC may sell to Deutsche Bank, and later repurchase, newly originated mortgage loans in an aggregate principal amount of up to $500 million.The Repurchase Agreement is set to expire on August 18, 2019, unless terminated earlier in accordance with its terms. The obligations of PMC under the Repurchase Agreement are fully guaranteed by the Company and the mortgage loans are serviced by PennyMac Loan Services, LLC, a subsidiary of PennyMac Financial Services, Inc. (NYSE: PFSI), to the terms of the Repurchase Agreement.
The Repurchase Agreement will be used by PMC to fund newly originated mortgage loans that it purchases from correspondent sellers and holds pending sale and/or securitization.Under the Repurchase Agreement, the principal amount paid by Deutsche Bank for each eligible mortgage loan is based on a percentage of the least of (i) the market value, as determined by Deutsche Bank in its sole discretion; (ii) the unpaid principal balance; or (iii) the takeout price of such mortgage loan. Upon the repurchase of a mortgage loan, PMC is required to repay Deutsche Bank 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. PMC also may be entitled to receive from Deutsche Bank a per loan credit for eligible mortgage loans that possess certain consumer relief characteristics.
The Repurchase Agreement requires the Company and PMC to make certain representations and warranties and to maintain various financial and other covenants, which include maintaining (i) a minimum tangible net worth at all times greater than or equal to $860 million for the Company and $150 million for PMC; (ii) a minimum in unrestricted cash, as of the end of each calendar month, greater than or equal to $40 million for the Company, on a consolidated basis, and $10 million for PMC; (iii) a ratio of total indebtedness to tangible net worth at all times not to exceed 5:1 for the Company and 10:1 for PMC; and (iv) profitability at the Company of no less than $1.00 for at least one of the two most recent calendar quarters.
The Repurchase Agreement also contains margin call provisions that provide Deutsche Bank with certain rights where there has been a decline in the market value of the purchased mortgage loans. Under these circumstances, Deutsche Bank may require PMC to transfer cash and/or additional eligible mortgage loans with an aggregate market value in an amount sufficient to eliminate any margin deficit resulting from such a decline.
In addition, the Repurchase Agreement contains events of default (subject to certain materiality thresholds and grace periods), including payment defaults, breaches of covenants and/or certain representations and warranties, cross-defaults, servicer termination events, 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 these types of transactions and include the acceleration of the principal amount outstanding under the Repurchase Agreement and the liquidation by Deutsche Bank of the mortgage loans then subject to the Repurchase Agreement.
The Company, through PMC, is required to pay Deutsche Bank certain administrative costs and expenses in connection with the structuring of the Repurchase Agreement.
The foregoing descriptions of the Repurchase Agreement and the related guaranty by the Company do not purport to be complete and are qualified in their entirety by reference to the full text of the Master Repurchase Agreement and the Guaranty, which have been filed with this Current Report on Form 8-K as Exhibit 10.1 and Exhibit 10.2, respectively.
Item 2.03Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.
The information set forth under Item 1.01 of this Current Report on Form 8-K is incorporated herein by reference.
Item 9.01Financial Statements and Exhibits.
(d)Exhibits.
PennyMac Mortgage Investment Trust ExhibitEX-10.1 2 pmt-ex101_6.htm EX-10.1 – DB MRA pmt-ex101_6.htm Exhibit 10.1 EXECUTION VERSION MASTER REPURCHASE AGREEMENT Dated as of August 18,…To view the full exhibit click here
About PennyMac Mortgage Investment Trust (NYSE:PMT)
PennyMac Mortgage Investment Trust is a specialty finance company that invests primarily in residential mortgage loans and mortgage-related assets. The Company conducts all of its operations, and makes all of its investments, through PennyMac Operating Partnership, L.P. and its subsidiaries. It operates through two segments: correspondent production and investment activities. The correspondent production segment represents its operations aimed at serving as an intermediary between mortgage lenders and the capital markets by purchasing, pooling and reselling newly originated prime credit quality mortgage loans either directly or in the form of mortgage-backed securities (MBS), using the services of PNMAC Capital Management and PennyMac Loan Services, LLC. The investment activities segment represents its investments in mortgage-related assets, which include distressed mortgage loans, real estate acquired in settlement of loans, MBS, mortgage servicing rights and excess servicing spread.
