Rithm Capital Corp. and Great Ajax Corp. Announce a Strategic Transaction
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Insights
The strategic transaction between Rithm Capital Corp. and Great Ajax Corp. represents a significant realignment within the real estate investment and asset management sectors. The provision of a one-year term loan up to $70 million by Rithm to Great Ajax is a noteworthy liquidity event, enabling Great Ajax to manage its debt obligations, specifically to repay outstanding convertible notes. This move could potentially improve Great Ajax's debt profile and interest expense, creating a more favorable financial position for the company.
Furthermore, the issuance of five-year warrants to Rithm, exercisable for shares of Great Ajax's common stock, introduces a future equity component that could dilute existing shareholders but also aligns Rithm's interests with the performance of Great Ajax's stock. The $14 million investment in Great Ajax common stock by Rithm solidifies a tangible commitment to the success of the strategic partnership, potentially adding confidence among investors regarding the long-term prospects of the collaboration.
From a stockholder's perspective, the support and exchange agreements with certain institutional stockholders indicate a level of backing for the transaction that could be reassuring. However, the dilution effect and the potential changes in control dynamics should be carefully evaluated. The transaction's success hinges on shareholder approval, which underscores the importance of corporate governance and shareholder relations in such strategic decisions.
The strategic transaction between Rithm Capital Corp. and Great Ajax Corp. is poised to reshape the competitive landscape of the commercial real estate investment market. By shifting Great Ajax's strategic direction towards commercial real estate-focused strategies, the company may benefit from Rithm's established platform and expertise in the sector. This could enhance Great Ajax's ability to identify and capitalize on investment opportunities, potentially improving its market position and performance.
As the real estate market is dynamic and subject to economic fluctuations, the timing and execution of this strategy are critical. The transaction enables Great Ajax to leverage Rithm's experience, which could be a decisive factor in navigating market cycles and achieving growth. Investors and market participants should monitor the integration of the two entities' operations and strategies closely, as successful execution may lead to increased market share and revenue growth opportunities for Great Ajax.
It is also important to consider the broader market implications of such a partnership. The consolidation of management under Rithm's affiliate could signal a trend towards larger, integrated real estate asset managers with diversified portfolios, which may influence competitive dynamics and could lead to further industry consolidation.
The strategic transaction between Rithm and Great Ajax involves several legal considerations that are crucial for the successful completion of the deal. The termination notice issued to Thetis Asset Management LLC by Great Ajax, in favor of a new management agreement with an affiliate of Rithm, indicates a significant shift in management structure and contractual relationships. This change will require careful legal navigation to ensure compliance with existing agreements and to mitigate any potential disputes or litigation risks.
The transaction is contingent upon Great Ajax stockholder approval, highlighting the importance of corporate law in such strategic moves. The need for shareholder approval underscores the fiduciary duties of the board to act in the best interest of the shareholders. The support and exchange agreements with certain institutional stockholders also involve complex legal arrangements that ensure these stakeholders are on board with the transaction, thereby increasing the likelihood of its passage.
Additionally, the issuance of warrants and common stock as part of the transaction introduces securities law considerations. These instruments must be structured and executed in accordance with securities regulations to prevent any legal complications that could delay or derail the transaction. Investors should be aware of these legal intricacies as they can have a significant impact on the timing and certainty of the deal's completion.
As part of the strategic transaction, Great Ajax has entered into a one-year term loan agreement with a subsidiary of Rithm for up to
In connection with the loan agreement, Great Ajax issued a termination notice to its external manager, Thetis Asset Management LLC (the “Manager”). Subject to the receipt of shareholder approval, Great Ajax will enter into a management agreement with an affiliate of Rithm to serve as its external manager. The transaction will enable Great Ajax to shift its strategic direction and capitalize on commercial real estate investment opportunities.
“We are excited to grow our asset management platform through this strategic transaction with Great Ajax, which represents another step forward in our evolution as a global alternative asset manager,” said Michael Nierenberg, Chairman, Chief Executive Officer and President of Rithm. “We believe Great Ajax will be well-positioned to execute on a commercial real estate-focused strategy and generate significant value for shareholders.”
“We are pleased Great Ajax’s stockholders will have the opportunity to benefit from the experience and track record of the Rithm team going forward,” said Lawrence Mendelsohn, Chairman and Chief Executive Officer of Great Ajax. “We look forward to working closely with Rithm to complete the transaction promptly and reposition Great Ajax to execute on unique investment opportunities in a dynamic commercial real estate market.”
Additional Transaction Details
In connection with the execution of the term loan agreement, Great Ajax will issue five-year warrants to Rithm, based on amounts drawn under the loan facility (subject to a specified minimum), exercisable for shares of Great Ajax’s common stock.
Great Ajax and Rithm have also entered into a securities purchase agreement, pursuant to which Great Ajax will issue Rithm
Great Ajax plans to seek stockholder approval of the transaction at an annual and special meeting of the stockholders of Great Ajax. Great Ajax has entered into support and exchange agreements with certain institutional stockholders, pursuant to which shares of Great Ajax preferred stock and shares underlying the warrants will be exchanged for shares of common stock and such stockholders have agreed to support the strategic transactions. After giving effect to the exchange, stockholders representing more than
For more information about this transaction, please see Great Ajax’s Current Report on Form 8-K, accessible on Great Ajax’s website.
Advisors
Citi is acting as the exclusive financial advisor to Rithm and Sidley Austin LLP is serving as legal counsel to Rithm. Piper Sandler & Co. is acting as exclusive financial advisor to Great Ajax and Mayer Brown LLP is acting as legal advisor to Great Ajax. BTIG, LLC is acting as exclusive financial advisor to the special committee of the Great Ajax board of directors and Sheppard Mullin LLP is acting as legal advisor to the special committee of the Great Ajax board of directors.
Additional Information and Where to Find It
This communication may be deemed to be solicitation material in respect of obtaining approval of the stockholders of Great Ajax of the proposed transactions (the “Stockholder Approval”). In connection with obtaining the Stockholder Approval, Great Ajax will file with the Securities and Exchange Commission (the “SEC”) and furnish to the Company’s stockholders a proxy statement and other relevant documents. This communication does not constitute a solicitation of any vote or approval. BEFORE MAKING ANY VOTING DECISION, GREAT AJAX’S STOCKHOLDERS ARE URGED TO READ THE PROXY STATEMENT IN ITS ENTIRETY WHEN IT BECOMES AVAILABLE AND ANY OTHER DOCUMENTS TO BE FILED THE SEC IN CONNECTION WITH THE STOCKHOLDER APPROVAL OR INCORPORATED BY REFERENCE IN THE PROXY STATEMENT BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE TRANSACTION. Stockholders will be able to obtain free copies of the proxy statement and other documents containing important information about the Company once such documents are filed with the SEC, through the website maintained by the SEC at http://www.sec.gov.
Participants in the Solicitation
Great Ajax and its executive officers, directors, other members of management and employees may be deemed, under SEC rules, to be participants in the solicitation of proxies from Great Ajax’s stockholder with respect to the proposed transaction. Information regarding the executive officers and directors of Great Ajax is set forth in its definitive proxy statement for its 2023 annual meeting filed with the SEC on April 21, 2023, as amended. More detailed information regarding the identity of potential participants, and their direct or indirect interests, by securities holdings or otherwise, will be set forth in the proxy statement and other materials to be filed with the SEC in connection with the proposed transaction.
Forward-Looking Statements
This communication contains forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are not historical in nature and can be identified by words such as “believe,” “expect,” “anticipate,” “estimate,” “project,” “plan,” “continue,” “intend,” “should,” “would,” “could,” “goal,” “objective,” “will,” “may,” “seek” or similar expressions or their negative forms. Forward-looking statements are subject to numerous assumptions, risks and uncertainties, which change over time and are beyond our control. Forward-looking statements speak only as of the date they are made. Rithm and Great Ajax do not assume any duty or obligation (and do not undertake) to update or supplement any forward-looking statements. Because forward-looking statements are, by their nature, to different degrees, uncertain and subject to numerous assumptions, risks and uncertainties, actual results or future events, circumstances or developments could differ, possibly materially, from those that Rithm and Great Ajax anticipated in its forward-looking statements, and future results and performance could differ materially from historical performance. Factors that could cause or contribute to such differences include, but are not limited to, those set forth in the section entitled “Risk Factors” in Rithm and Great Ajax’s most recent Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q filed with the SEC, and other reports filed by Rithm and Great Ajax with the SEC, copies of which are available on the SEC’s website, www.sec.gov. The list of factors presented here is not, and should not be, considered a complete statement of all potential risks and uncertainties. Unlisted factors may present significant additional obstacles to the realization of forward-looking statements.
About Rithm Capital Corp.
Rithm Capital (NYSE: RITM) is a global asset manager focused on real estate, credit and financial services. Rithm makes direct investments and operates several wholly-owned operating businesses. Rithm’s businesses include Sculptor Capital Management, Inc., an alternative asset manager, as well as Newrez LLC and Genesis Capital LLC, leading mortgage origination and servicing platforms. Rithm seeks to generate attractive risk-adjusted returns across market cycles and interest rate environments. Since inception in 2013, Rithm has delivered approximately
About Great Ajax Corp.
Great Ajax (NYSE: AJX) is a real estate investment trust that focuses primarily on acquiring, investing in and managing re-performing loans (“RPLs”) and non-performing loans (“NPLs”) secured by single-family residences and commercial properties. In addition to its continued focus on RPLs and NPLs, it also originates and acquires small balance commercial mortgage loans secured by multi-family retail/residential and mixed-use properties. Great Ajax is externally managed by Thetis Asset Management LLC, an affiliated entity. Great Ajax’s mortgage loans and other real estate assets are serviced by Gregory Funding LLC, an affiliated entity.
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Rithm
Investor Relations
(212) 850-7770
ir@rithmcap.com
Media
Jon Keehner / Sarah Salky / Erik Carlson
Joele Frank, Wilkinson Brimmer Katcher
(212) 355-4449
ritm-jf@joelefrank.com
Great Ajax
Mary Doyle
Chief Financial Officer
(503) 444-4224
mary.doyle@great-ajax.com
Source: Rithm Capital Corp. and Great Ajax Corp.
FAQ
What is the strategic transaction between Rithm Capital Corp. and Great Ajax Corp. about?
How much is the term loan that Great Ajax is receiving from Rithm?
What does Great Ajax plan to do with the borrowings under the term loan?
Who will serve as Great Ajax's external manager after the strategic transaction?
What agreements have been entered into between Great Ajax and Rithm as part of the transaction?
