MFA Financial, Inc. Announces Pricing of Public Offering of Senior Notes
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Insights
The issuance of $100 million in senior notes by MFA Financial, Inc. represents a strategic move to strengthen the company's capital structure. The 8.875% interest rate on the notes is notably higher than the current average for investment-grade corporate bonds, which typically hover around 3-4%. This could indicate a higher risk perception among investors or a strategic decision by the company to offer an attractive yield to ensure the issuance's success.
Given the investment grade rating of BBB- from Egan-Jones Ratings Company, the notes fall on the lower end of investment-grade securities. This rating suggests moderate risk and may affect the demand and pricing of the notes in the secondary market. For stakeholders, the intended use of proceeds for general corporate purposes and working capital, including the potential repayment of existing indebtedness, is a positive sign, suggesting a proactive approach to liquidity management and balance sheet optimization.
Investors should monitor the performance of the company's mortgage-related assets, as the proceeds may be directed towards such investments. The performance of these assets will be critical in determining the company's ability to meet its interest obligations and the overall return on investment for note holders.
The decision to list the new senior notes on the New York Stock Exchange under the symbol 'MFAN' within 30 days of issuance will provide additional liquidity and transparency for investors. The option for underwriters to purchase an additional $15 million to cover over-allotments is a common practice that could stabilize the notes' price post-issuance.
The timing of the offering's closure, expected on January 11, 2024, is also of interest, as it aligns with the maturity of the company's 6.25% Convertible Senior Notes due in 2024. This suggests a strategic refinancing effort, potentially aimed at managing the company's interest expenses and debt profile.
Furthermore, the ability to redeem the notes at the company's option starting from February 15, 2026, provides MFA Financial with financial flexibility. However, investors should be aware of potential reinvestment risks, as early redemption could lead to a return of principal at a time when reinvestment yields might be lower.
The offering is conducted under the company's existing shelf registration statement filed with the Securities and Exchange Commission (SEC), which is a regulatory requirement for public offerings of securities. The use of a shelf registration allows for a more expedient process, as the company can offer and sell securities without the need for separate registrations for each issuance.
Prospective investors should closely review the prospectus and related prospectus supplement, which will provide detailed information about the terms of the notes, the company's financial condition and the risks involved in the investment. The legal framework governing these securities ensures that all material information is disclosed, allowing for informed investment decisions.
It is also important to note that the press release explicitly states that the offering is not an offer to sell or a solicitation of an offer to buy in any jurisdiction where such actions would be unlawful. This underscores the importance of compliance with state and international securities laws, which can vary significantly and impact the distribution and sale of the notes.
The Company intends to apply to list the Notes on the New York Stock Exchange under the symbol “MFAN” and, if the application is approved, expects trading in the Notes on the New York Stock Exchange to begin within 30 days after the Notes are first issued. The Notes have received an investment grade rating of BBB- from Egan-Jones Ratings Company, an independent, unaffiliated rating agency.
The Company intends to use the net proceeds of the offering for general corporate purposes, which may include investing in additional residential mortgage-related assets, including but not limited to, residential whole loans, business purpose loans, MBS and other mortgage-related investments, and for working capital, which may include, among other things, the repayment of existing indebtedness, including amounts outstanding under the Company’s repurchase agreements and the repurchase or repayment of a portion of the Company’s
The Notes will be senior unsecured obligations of the Company, and pay interest quarterly in cash on February 15, May 15, August 15 and November 15 of each year, commencing May 15, 2024. The Notes will mature on February 15, 2029, and may be redeemed, in whole or in part, at any time, or from time to time, at the Company’s option on or after February 15, 2026.
Wells Fargo Securities, LLC, Morgan Stanley & Co. LLC, Piper Sandler & Co. and UBS Securities LLC will serve as joint book-running managers for the offering.
The Notes will be offered under the Company’s existing shelf registration statement filed with the Securities and Exchange Commission. The offering of these Notes will be made only by means of a prospectus and a related prospectus supplement, a copy of which may be obtained by contacting:
Wells Fargo Securities, LLC
608 2nd Avenue South, Suite 1000
Attn: WFS Customer Service
Email: wfscustomerservice@wellsfargo.com
Toll-Free: 1-800-645-3751
Morgan Stanley & Co. LLC
180 Varick St., 2nd Floor,
Attn: Prospectus Department
Toll-Free: 1-800-584-6837
Piper Sandler & Co.
1251 Avenue of the
Attn: Debt Capital Markets;
Email: fsg-dcm@psc.com
UBS Securities LLC
1285 Avenue of the
Attn: Prospectus Department
Toll-Free: 1-888-827-7275
This press release shall not constitute an offer to sell or the solicitation of an offer to buy the Notes or any other securities, nor shall there be any sale of such Notes or any other securities in any state or other jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state or other jurisdiction.
About MFA Financial, Inc.
MFA Financial, Inc. is a leading specialty finance company that invests in residential mortgage loans, residential mortgage-backed securities and other real estate assets. Through its wholly owned subsidiary, Lima One Capital, MFA also originates and services business purpose loans for real estate investors. MFA has distributed over
Forward-Looking Statements
This press release contains forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other federal securities laws. Forward-looking statements involve numerous risks and uncertainties. The Company’s actual results may differ from the Company’s beliefs, expectations, estimates and projections and, consequently, you should not rely on these forward-looking statements as predictions of future events. Forward-looking statements are not historical in nature and can be identified by words such as “anticipate,” “estimate,” “will,” “should,” “expect,” “believe,” “intend,” “seek,” “plan” and similar expressions or their negative forms, or by references to strategy, plans, or intentions. Forward-looking statements are based on the Company’s beliefs, assumptions and expectations of the Company’s future performance, taking into account information currently available to it. No assurance can be given that the offering discussed above will be consummated, or that the net proceeds of the offering will be used as indicated. Consummation of the offering and the application of the net proceeds of the offering are subject to numerous possible events, factors and conditions, many of which are beyond the control of the Company and not all of which are known to it, including, without limitation, market conditions and those described under the heading “Risk Factors” in the prospectus supplement relating to the offering and in the Company’s most recent Annual Report on Form 10-K and any subsequent Quarterly Reports on Form 10-Q, which can be accessed at the Securities and Exchange Commission’s website at www.sec.gov. All forward-looking statements speak only as of the date on which they are made. New risks and uncertainties arise over time, and it is not possible to predict those events or how they may affect the Company. The Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law.
Category: Public Offering
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InvestorRelations@mfafinancial.com
212-207-6488
www.mfafinancial.com
Source: MFA Financial, Inc.
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