PennyMac Mortgage Investment Trust Announces Proposed Private Placement of Exchangeable Senior Notes
PennyMac Mortgage Investment Trust (NYSE: PMT) announced a private offering of $200 million in Exchangeable Senior Notes due 2029 through its subsidiary, PennyMac Corp (PMC). Initial purchasers have a 13-day option to buy an additional $30 million in Notes.
The Notes are only available to qualified institutional buyers under Rule 144A of the Securities Act of 1933. These Notes will be guaranteed by PMT and can be exchanged for cash, PMT's common shares, or a combination thereof.
Net proceeds will fund PMT's business activities, including acquiring mortgage servicing rights, GSE credit risk transfer securities, and other mortgage-related securities, funding correspondent lending, and repaying existing debt.
- Private offering of $200 million in Notes.
- Option to purchase an additional $30 million.
- Notes guaranteed by PMT.
- Flexible exchange options including cash and PMT shares.
- Net proceeds to fund business and investment activities.
- Unregistered securities under the Securities Act.
- Dependence on institutional buyers for Notes.
- Potential dilution of PMT common shares.
Insights
PennyMac Mortgage Investment Trust's (PMT) announcement of a proposed private placement of $200 million in Exchangeable Senior Notes is a significant event for investors. This move to raise capital via senior notes, which are essentially loans that must be repaid before other debts in the event of bankruptcy, signals PMT's intention to bolster its financial resources for various business activities. The fact that the initial purchasers can opt to buy an additional $30 million in notes further emphasizes the trust's confidence in securing this funding.
The use of proceeds highlights PMT's strategic focus on expanding its mortgage servicing rights, acquiring credit risk transfer securities and funding its correspondent lending business. These activities are core to PMT's business model, which relies heavily on mortgage-related investments and lending. By potentially repaying existing indebtedness, PMT aims to improve its debt profile, which could be seen as a positive move towards maintaining financial stability and enhancing its ability to leverage future opportunities.
However, the notes being exchangeable into common shares or cash introduces an element of equity dilution risk, depending on the company's decision at the time of exchange. This could impact the stock's value if the market perceives potential dilution negatively. Moreover, the interest rate and terms of the notes, which will be determined at the time of pricing, will be key factors to watch. A high-interest rate could signal higher costs of borrowing, potentially impacting PMT's net income.
For retail investors, understanding the implications of this debt issuance is crucial. It reflects PMT's strategy to pursue growth opportunities and manage its debt, yet it also brings potential risks related to equity dilution and interest expenses. Investors should monitor the terms of the notes and subsequent deployment of funds closely.
From a market perspective, PMT’s decision to issue Exchangeable Senior Notes can be seen as a strategic move to capitalize on the current market conditions. Exchangeable notes are a hybrid security that combines features of debt and equity, allowing the company to benefit from lower interest rates compared to traditional corporate bonds while providing flexibility in repayment methods. This could be particularly advantageous if interest rates rise in the near future, as the company locks in current rates.
The issuance to qualified institutional buyers under Rule 144A indicates PMT’s focus on a sophisticated investor base, which may provide more stable and long-term investment compared to retail investors. Additionally, this move could be interpreted as a sign of PMT’s confidence in its stock's future performance, as the notes are exchangeable into its common shares.
For retail investors, it’s important to note that institutional investors participating in this private placement might have access to more detailed financial information and projections than what is publicly disclosed. This could lead to an asymmetry of information, where institutional insights might give them an edge in anticipating PMT's future performance. Therefore, retail investors should stay informed through PMT’s quarterly earnings reports and other disclosures to gauge the impact of this new funding on the company's operations and financial health.
The Notes will be fully and unconditionally guaranteed by PMT. Upon exchange, PMC will pay cash up to the aggregate principal amount of the Notes to be exchanged and pay or deliver, as the case may be, cash, PMT’s common shares of beneficial interest (“Common Shares”) or a combination thereof, at PMC’s election, in respect of the remainder, if any, of its exchange obligation in excess of the aggregate principal amount of the Notes being exchanged. The interest rate, exchange rate and other terms of the Notes will be determined at the time of pricing of the offering. The Notes will be PMC’s senior unsecured obligations and will rank equally with all of its present and future senior unsecured debt and senior to any future subordinated debt.
The net proceeds from the offering are intended to be used to fund PMT’s business and investment activities, which may include: the acquisition of mortgage servicing rights, government-sponsored enterprise credit risk transfer securities and other mortgage-related securities; funding PMT’s correspondent lending business, including the purchase of Agency-eligible residential mortgage loans; repayment of other indebtedness, which may include the repurchase or repayment of a portion of PMC’s
Neither the Notes nor the Common Shares issuable upon exchange of the Notes will be registered under the Securities Act. Neither the Notes nor the Common Shares issuable upon exchange of the Notes may be offered or sold in
This press release shall not constitute an offer to sell or a solicitation of an offer to buy nor shall there be any sale of these securities in any state in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any state. It is issued pursuant to Rule 135c under the Securities Act.
About PennyMac Mortgage Investment Trust
PennyMac Mortgage Investment Trust is a mortgage real estate investment trust (REIT) that invests primarily in residential mortgage loans and mortgage-related assets. PMT is externally managed by PNMAC Capital Management, LLC (“PNMAC”), a wholly-owned subsidiary of PennyMac Financial Services, Inc. (NYSE: PFSI) (“PFSI”).
Forward-Looking Statements
This press release contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, regarding management’s beliefs, estimates, projections and assumptions with respect to, among other things, the Company’s financial results, future operations, business plans and investment strategies, as well as industry and market conditions, all of which are subject to change. Forward-looking statements are generally identifiable by use of forward-looking terminology like “may,” “will,” “should,” “potential,” “intend,” “expect,” “seek,” “anticipate,” “estimate,” “approximately,” “believe,” “could,” “project,” “predict,” “continue,” “plan” or other similar words or expressions. Forward-looking statements are based on certain assumptions, discuss future expectations, describe future plans and strategies, contain financial and operating projections or state other forward-looking information. Examples of forward-looking statements include: (i) projections of the Company’s revenues, income, earnings per share, capital structure or other financial items; (ii) descriptions of the Company’s plans or objectives for future operations, products or services; (iii) forecasts of the Company’s future economic performance, interest rates, profit margins and the Company’s share of future markets; and (iv) descriptions of assumptions underlying or relating to any of the foregoing expectations regarding the timing of generating any revenues. The Company’s ability to predict results or the actual effect of future events, actions, plans or strategies is inherently uncertain. Although the Company believes that the expectations reflected in such forward-looking statements are based on reasonable assumptions, the Company’s actual results and performance could differ materially from those set forth in the forward-looking statements. There are a number of factors, many of which are beyond the Company’s control, that could cause actual results to differ significantly from its expectations. Some of these factors are discussed below. Factors that could cause actual results to differ materially from historical results or those anticipated include, but are not limited to: changes in interest rates and other macroeconomic conditions; the Company’s ability to comply with various federal, state and local laws and regulations that govern the Company’s business; changes in the Company’s investment objectives or investment or operational strategies, including any new lines of business or new products and services that may subject it to additional risks; changes in real estate values, housing prices and housing sales; the degree and nature of the Company’s competition; volatility in the Company’s industry, the debt or equity markets, the general economy or the real estate finance and real estate markets specifically, whether the result of market events or otherwise; events or circumstances which undermine confidence in the financial and housing markets or otherwise have a broad impact on financial and housing markets, such as the sudden instability or collapse of large depository institutions or other significant corporations, terrorist attacks, natural or man-made disasters, or threatened or actual armed conflicts; changes in general business, economic, market, employment and domestic and international political conditions, or in consumer confidence and spending habits from those expected; the availability of, and level of competition for, attractive risk-adjusted investment opportunities in loans and mortgage-related assets that satisfy the Company’s investment objectives; the inherent difficulty in winning bids to acquire loans, and the Company’s success in doing so; the concentration of credit risks to which the Company is exposed; the Company’s dependence on PFSI, PNMAC and PennyMac Loan Services, LLC (“PLS”), potential conflicts of interest with such entities and their affiliates, and the performance of such entities; changes in personnel and lack of availability of qualified personnel at PFSI, PNMAC and PLS, and their affiliates; the availability, terms and deployment of short-term and long-term capital; the adequacy of the Company’s cash reserves and working capital; the Company’s substantial amount of debt; the Company’s ability to maintain the desired relationship between its financing and the interest rates and maturities of its assets; the timing and amount of cash flows, if any, from the Company’s investments; the Company’s exposure to risks of loss and disruptions in operations resulting from adverse weather conditions, man-made or natural disasters, climate change and pandemics such as the COVID-19 pandemic; unanticipated increases or volatility in financing and other costs, including a rise in interest rates; the performance, financial condition and liquidity of borrowers; the ability of the Company’s servicer, which also provides the Company with fulfillment services, to approve and monitor correspondent sellers and underwrite loans to investor standards; incomplete or inaccurate information or documentation provided by customers or counterparties, or adverse changes in the financial condition of the Company’s customers and counterparties; the Company’s indemnification and repurchase obligations in connection with loans it purchases and later sells or securitizes; the quality and enforceability of the collateral documentation evidencing the Company’s ownership and rights in the assets in which it invests; increased rates of delinquency, default and/or decreased recovery rates on the Company’s investments; the performance of loans underlying mortgage-backed securities in which the Company retains credit risk; the Company’s ability to foreclose on its investments in a timely manner or at all; the degree to which the Company’s hedging strategies may or may not protect it from interest rate volatility; the effect of the accuracy of or changes in the estimates the Company makes about uncertainties, contingencies and asset and liability valuations when measuring and reporting upon the Company’s financial condition and income; the Company’s ability to maintain appropriate internal control over financial reporting; technology failures, cybersecurity risks and incidents, and the Company’s ability to mitigate cybersecurity risks and cyber intrusions; the Company’s ability to obtain and/or maintain licenses and other approvals in those jurisdictions where required to conduct its business; the Company’s ability to detect misconduct and fraud; changes in the Company’s credit risk transfer arrangements and agreements; developments in the secondary markets for the Company’s loan products; legislative and regulatory changes that impact the loan industry or housing market; changes in regulations that impact the business, operations or governance of mortgage lenders and/or publicly-traded companies or such changes that increase the cost of doing business with such entities; the Consumer Financial Protection Bureau and its issued and future rules and the enforcement thereof; changes in government support of homeownership; the Company’s ability to effectively identify, manage and hedge the Company’s credit, interest rate, prepayment, liquidity and climate risks; changes in government or government-sponsored home affordability programs; limitations imposed on the Company’s business and its ability to satisfy complex rules for it to qualify as a REIT for
View source version on businesswire.com: https://www.businesswire.com/news/home/20240520515887/en/
Media
Lauren Padilla
mediarelations@pennymac.com
805.225.8224
Investors
Kevin Chamberlain
Isaac Garden
investorrelations@pennymac.com
818.224.7028
Source: PennyMac Mortgage Investment Trust
FAQ
What is the amount of the private offering announced by PennyMac Mortgage Investment Trust?
What is the additional purchase option for the initial buyers of the Notes?
How will the net proceeds from the Notes offering be used by PMT?
When are the Exchangeable Senior Notes due?
Who can purchase the Notes offered by PennyMac Corp?
