On December 12, 2019, Western Asset Mortgage Capital Corporation, a Delaware corporation (the “Company”), completed the issuance and sale of $50.0 million aggregate principal amount of its 6.75% Convertible Senior Notes due 2022 (the “Reopened Notes”) at a price to the public of 101.25% of the principal amount of the Reopened Notes plus accrued and unpaid interest. The Reopened Notes were offered to an underwriting agreement, dated December 9, 2019 (the “Underwriting Agreement”), by and among the Company, Western Asset Management Company, LLC, a California limited liability company and the manager of the Company, and JMP Securities LLC, as underwriter (the “Underwriter”), whereby the Company agreed to sell to the Underwriter and the Underwriter agreed to purchase from the Company, subject to and upon the terms and conditions set forth in the Underwriting Agreement, the Additional Notes.

The Reopened Notes will be a further issuance of, be fully fungible with, and rank equally in right of payment with and form a single series with the $115.0 million principal amount of 6.75% Convertible Senior Notes due 2022 issued by the Company in October 2017 (the “Original Notes”) and the $40.0 million principal amount of 6.75% Convertible Senior Notes due 2022 issued by the Company in August 2019 (the “First Reopened Notes” and, together with the Original Notes, the “Existing Notes”). References to “Notes” herein collectively refer to the Reopened Notes and the Existing Notes. The Reopened Notes have substantially identical terms as the Existing Notes and have the same CUSIP number as the Existing Notes. As a result of the Reopenend Notes issuance, the aggregate principal amount outstanding of the 6.75% Senior Notes due 2022 is approximately $205.0 million.

The Notes are senior unsecured obligations of the Company, bear interest at a rate equal to 6.75% per year, payable semiannually in arrears on April 1 and October 1 of each year, and will mature on October 1, 2022 (the “Maturity Date”), unless earlier converted, redeemed or repurchased. The Company may not redeem the Notes prior to July 1, 2022 and no sinking fund is provided for the Notes. On or after July 1, 2022, the Company may redeem the Notes for cash, in whole or from time to time in part, at a redemption price equal to 50% of the principal amount of the notes to be redeemed, plus accrued and unpaid interest thereon to, but excluding, the redemption date. The Notes are convertible prior to July 1, 2022 upon the satisfaction of certain conditions and at any time on or after July 1, 2022 until the business day preceding the Maturity Date. The Company may settle conversions in cash, shares of the Company’s common stock or a combination thereof, at the Company’s election.

>The conversion rate currently equals 83.1947 shares of common stock per $1,000 principal amount of Notes, which is equivalent to a conversion price of approximately $12.02 per share of common stock, representing an approximate 15% premium based on the closing price of the Company’s common stock of $10.48 per share on December 9, 2019. The conversion rate is subject to adjustment upon the occurrence of certain specified events. In addition, following certain corporate events that occur prior to the Maturity Date, the Company will increase the conversion rate for a holder who elects to convert its Notes in connection with such a corporate event in certain circumstances.

>If the Company undergoes a fundamental change (as defined in the Supplemental Indenture), holders may require the Company to repurchase for cash all or any portion of their Notes at a fundamental change repurchase price equal to 50% of the principal amount of the Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date.

The net proceeds to the Company from the sale of the Additional Notes, after deducting the underwriter’s discount and commission and estimated offering expenses, are expected to be approximately $49.9 million. The Company intends to use the net proceeds of the offering of the Additional Notes primarily for general corporate purposes, including to opportunistically invest in credit sensitive investments consisting of Residential Whole Loans, Commercial Loans and Non-Agency CMBS . The exact investment of the proceeds will depend on prevailing market and investment conditions at the time our Manager invests the net proceeds

The Additional Notes were issued under the base indenture (the “Base Indenture”), dated as of October 2, 2017, between the Company and Wells Fargo Bank, National Association, as trustee (the “Trustee”), as supplemented by a first supplemental indenture (the “Supplemental Indenture”), dated as of October 2, 2017, between the Company and the Trustee with respect to the Notes.

The offer and sale of the Additional Notes were registered with the Securities and Exchange Commission (the “Commission”) to a registration statement on Form S-3 (File No. 333-216496) under the Securities Act of 1933, as amended (the “Securities Act”). The material terms of the Additional Notes are described in a prospectus supplement filed by the Company with the Commission on December 10, 2019 to Rule 424(b)(5) under the Securities Act.

Copies of the Underwriting Agreement, the Base Indenture, the Supplemental Indenture and the form of the Additional Notes are attached hereto as Exhibit 1.1, Exhibit 4.1, Exhibit 4.2 and Exhibit 4.3, respectively, and are incorporated herein by reference. The foregoing summaries do not purport to be complete and are qualified in their entirety by reference to the Underwriting Agreement, the Base Indenture, the Supplemental Indenture and the form of the Additional Notes. The legal opinion of Skadden, Arps, Slate, Meagher & Flom LLP relating to the legality of the Additional Notes is attached as Exhibit 5.1 to this Current Report on Form 8-K.

Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.

The information set forth in Item 1.01 is incorporated herein by reference into this Item 2.03.

Item 9.01 Financial Statements and Exhibits

(d) Exhibits

>>>* Filed herewith.

Western Asset Mortgage Capital Corp Exhibit
EX-1.1 2 ex1112122019.htm EXHIBIT 1.1 Exhibit Exhibit 1.1Execution VersionWestern Asset Mortgage Capital Corporation6.75% Convertible Senior Notes due 2022Underwriting AgreementDecember 9,…
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About Western Asset Mortgage Capital Corporation (NYSE:WMC)

Western Asset Mortgage Capital Corporation is a real estate investment trust focused on investing in, financing and managing a portfolio of real estate related securities, whole-loans and other financial assets. The Company’s portfolio consists of Agency residential mortgage-backed securities (RMBS) (including To-Be-Announced securities (TBAs)), Non-Agency RMBS, Agency and Non-Agency commercial mortgage-backed securities (CMBS), and Whole-Loans. In addition, the Company also invests in other securities, including certain Agency obligations that are not technically mortgage-backed securities (MBS), as well as in certain Non-United States CMBS and asset-backed securities (ABS) investments secured by a portfolio private student loans. The Company is externally managed and advised by Western Asset Management Company.