UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): September 14, 2021 (September 10, 2021)
Western Asset Mortgage Capital Corporation
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Delaware
(STATE OF INCORPORATION) | | | | | | | | |
| 001-35543 | | 27-0298092 |
| (COMMISSION FILE NUMBER) | | (IRS EMPLOYER ID. NUMBER) |
| | | | | | | | |
| 385 East Colorado Boulevard | | 91101 |
| Pasadena | California | (ZIP CODE) |
| (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) | | |
(626) 844-9400
(REGISTRANT’S TELEPHONE NUMBER, INCLUDING AREA CODE)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act: | | | | | | | | | | | | | | |
| Title of Each Class | | Trading Symbol(s) | | Name of Each Exchange on Which Registered |
| Common Stock, $0.01 par value | | WMC | | New York Stock Exchange |
Indicate by check mark whether the registrant is an emerging growth company as defined in as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 1.01 Entry into a Material Definitive Agreement
On September 14, 2021 (the “Closing Date”), Western Asset Mortgage Capital Corporation, a Delaware corporation (the “Company”), completed the issuance and sale of $75 million aggregate principal amount of its 6.75% Convertible Senior Notes due 2024 (the “Notes”) pursuant to an underwriting agreement, dated September 10, 2021 (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 Notes. In addition, the Company granted the Underwriter the right to purchase, exercisable within a 30-day period, up to an additional $11.25 million aggregate principal amount of the Notes solely to cover over-allotments. As of the Closing Date, the Underwriter had not exercised its over-allotment option.
The Notes will be senior unsecured obligations of the Company, bear interest at a rate equal to 6.75% per year, payable semiannually in arrears on March 15 and September 15 of each year, beginning on March 15, 2022, and will mature on September 15, 2024 (the “Maturity Date”), unless earlier converted, redeemed or repurchased. The Company may not redeem the Notes prior to June 15, 2024 and no sinking fund is provided for the Notes. On or after June 15, 2024, the Company may redeem the Notes for cash, in whole or from time to time in part, at a redemption price equal to 100% of the principal amount of the notes to be redeemed, plus accrued and unpaid interest thereon to, but excluding, the redemption date. The Notes will be convertible prior to June 15, 2024 upon the satisfaction of certain conditions and at any time on or after June 15, 2024 until the second 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 will initially equal 337.9520 shares of common stock per $1,000 principal amount of Notes, which is equivalent to an initial conversion price of approximately $2.96 per share of common stock, representing an approximate 10% conversion premium based on the closing price of the Company’s common stock of $2.69 per share on September 9, 2021. The conversion rate will be 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 100% 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 Notes, after deducting the underwriter’s discount and commission and estimated offering expenses, are expected to be approximately $72.5 million (or approximately $83.4 million if the Underwriter’s over-allotment option is exercised in full). The Company intends to use the net proceeds of the offering of the Notes, together with approximately $27.8 million of cash on hand, to repurchase approximately $100.3 million in outstanding principal amount of the Company’s 6.75% Notes due October 1, 2022 and the remainder, if any, of the net proceeds for general corporate purposes, which may include debt repurchases.
The 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 second supplemental indenture (the “Supplemental Indenture”), dated as of the Closing Date, between the Company and the Trustee with respect to the Notes.
The offer and sale of the Notes were registered with the Securities and Exchange Commission (the “Commission”) pursuant to a registration statement on Form S-3 (File No. 333-238486) under the Securities Act of 1933, as amended (the “Securities Act”). The material terms of the Notes are described in a prospectus supplement filed by the Company with the Commission on September 13, 2021 pursuant 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 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 Notes. The legal opinion of Skadden, Arps, Slate, Meagher & Flom LLP relating to the legality of the 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
| | | | | |
| Exhibit No. | Description |
| 1.1* | |
| 4.1 | Indenture, dated as of October 2, 2017, between Western Asset Mortgage Capital Corporation and Wells Fargo Bank, National Association (incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K, filed on October 3, 2017). |
| 4.2* | |
| 4.3* | Form of 6.75% Convertible Senior Notes due 2024 (included as part of Exhibit 4.2 hereto). |
| 5.1* | |
| 8.1* | |
| 23.1* | Consent of Skadden, Arps, Slate, Meagher & Flom LLP (included as part of Exhibit 5.1 hereto). |
| 104 | Cover Page Interactive Data File (the cover page XBRL tags are embedded within the iXBRL document). |
* Filed herewith.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereto duly authorized.
| | | | | | | | | | | | | | |
| | | |
| Date: September 14, 2021 | By: | /s/ Lisa Meyer | |
| | | Name: | Lisa Meyer | |
| | | Title: | Chief Financial Officer and Treasurer | |
