AFC Gamma Successfully Exits $84.0 Million Loan to Subsidiary of Public Company H
AFC Gamma (NASDAQ: AFCG) announced the successful exit of its $84 million loan to a Subsidiary of Public Company H. The loan, which was the largest in AFC Gamma's portfolio, had issues with the borrower missing an April interest payment. Despite this, AFC Gamma sold the loan to a third party at par plus accrued interest, achieving a 19.9% internal rate of return (IRR). CEO Daniel Neville emphasized the company's focus on reducing exposure to underperforming credits and plans to redeploy the capital into deals with strong risk-adjusted returns. AFC Gamma specializes in lending to state-law compliant cannabis operators and targets direct lending opportunities between $10 million and $100 million.
- Successfully exited $84 million loan, the largest in the portfolio.
- Achieved a 19.9% internal rate of return (IRR) from the loan.
- Sale of loan was at par plus accrued interest.
- CEO emphasized focus on reducing exposure to underperforming credits.
- Plan to redeploy capital into deals with strong risk-adjusted returns.
- Focus on diversifying the portfolio.
- Borrower failed to make the April interest payment in May.
- Largest loan in portfolio was underperforming, indicating potential risk in investment choices.
Insights
The announcement that AFC Gamma successfully exited its $84.0 million loan to a subsidiary of Public Company H, which was their largest loan, holds substantial implications for investors. The key outcome here is the 19.9% internal rate of return (IRR) achieved over the life of the loan. An IRR of nearly
From a financial health perspective, this exit is significant since the borrower had failed to make its April interest payment, indicating potential credit risk. Successfully selling the loan at par plus accrued interest indicates a robust risk management strategy and the strength of AFC Gamma's lending and recovery operations. This move not only mitigates exposure to underperforming credits but also frees up capital for future investments, which could potentially generate similar or higher returns.
For retail investors, it's essential to note that while the high IRR is attractive, the context of a missed interest payment could hint at underlying risks inherent in AFC Gamma’s portfolio. However, the proactive approach and successful loan exit might outweigh these concerns, suggesting solid leadership and effective portfolio management. The potential redeployment of capital into more secure and diverse opportunities further strengthens the company's outlook.
While the financial success of this loan exit is clear, it's also essential to consider the legal and contractual aspects underpinning this transaction. The fact that AFC Gamma was able to sell the loan at par plus accrued interest, despite the borrower’s failure to make an interest payment, signals strong contractual protections. This implies that AFC Gamma had well-structured loan agreements and robust collateral in place, allowing them to enforce terms effectively and recoup their investment fully.
For investors, understanding the significance of these legal safeguards cannot be understated. Effective legal frameworks and strong collateral agreements are critical in protecting principal investments, especially in high-risk sectors such as cannabis lending. The success in this instance showcases AFC Gamma's ability to navigate legal complexities and secure favorable outcomes even when faced with non-performing loans.
This aspect provides confidence in the company’s ability to manage future credit risks and mitigate potential losses, enhancing overall investment stability.
WEST PALM BEACH, Fla., June 04, 2024 (GLOBE NEWSWIRE) -- AFC Gamma, Inc. (NASDAQ:AFCG) (“AFC Gamma”) today announced that it has successfully exited its
“When I joined AFC, I was focused on reducing exposure to underperforming credits through proactive portfolio management. This exit demonstrates our commitment to working through challenging loans to deliver value for our shareholders. We look forward to redeploying the capital into deals with strong risk adjusted returns and further diversifying our portfolio,” said Daniel Neville, AFC Gamma’s Chief Executive Officer. “Furthermore, we are pleased to exit the largest loan in our portfolio and generate an IRR of
About AFC Gamma, Inc.
AFC Gamma, Inc. (NASDAQ: AFCG) is a publicly-traded, institutional lender that originates, structures and underwrites loans secured by commercial real estate and other types of financing solutions. AFC Gamma targets direct lending and bridge loan opportunities typically ranging from
Forward-Looking Statements
This news release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that reflect the company’s current views and projections with respect to, among other things, operating results and anticipated investments. All statements other than historical facts, are forward-looking statements. Words such as “believes,” “expects,” “will,” “intends,” “plans,” “guidance,” “estimates,” “projects,” “anticipates,” and “future” or similar expressions are intended to identify forward-looking statements. These forward-looking statements are subject to the inherent uncertainties in predicting future results and conditions and are not guarantees of future performance, conditions or results. Certain factors, risks and uncertainties discussed under the caption “Risk Factors” and elsewhere in AFC Gamma’s most recently filed periodic reports on Form 10-K and Form 10-Q and subsequent filings, could cause actual results and performance to differ materially from those projected in these forward-looking statements.
Investor Relations Contact:
Robyn Tannenbaum
(561) 510-2293
ir@afcgamma.com
www.afcgamma.com
Media Contact:
Profile Advisors
Rich Myers and Rachel Goun
(347) 343-2999
afcgamma@profileadvisors.com
FAQ
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