Houlihan Lokey Advises MFA Financial

Houlihan Lokey is pleased to announce the successful placement of $2.15 billion of capital for MFA Financial, Inc. (NYSE:MFA), consisting of a $500 million private senior secured loan with warrants funded by Apollo Global Management, Inc. (Apollo), and a $1.65 billion new asset-level term facility funded by Athene USA Corporation and Barclays Bank PLC. In addition, Apollo and Athene Holding Ltd. (Athene) have committed to purchase the lesser of 4.9% or $50 million of MFA's common stock in the open market over a 12-month period and Athene has committed to purchase a portion of MFA's first securitization of non-qualified mortgage residential whole loans, subject to certain pricing conditions. The transaction closed on June 26, 2020.

Founded in 1997, MFA is an internally-managed real estate investment trust (REIT) primarily engaged in the business of investing, on a leveraged basis, in residential mortgage assets including residential whole loans and securities. As of May 31, 2020, MFA had a residential mortgage asset portfolio of $6.6 billion.

In mid-March 2020, unprecedented disruption in residential mortgage markets, due to COVID-19 concerns, drove a lack of liquidity and subsequently forced selling in mortgage-backed securities and other securities across the industry. This severe and abrupt macro shock significantly impacted pricing, causing margin calls from the company’s senior secured lenders to balloon. Despite significant asset disposals to generate liquidity, MFA was unable to meet its numerous and significant margin calls and entered into forbearance discussions with lenders, ultimately reaching an agreement on April 10, 2020, that was subsequently extended to the end of June 2020. Proceeds from the transaction will enable the company to exit the forbearance agreement, pay accumulated unpaid dividends on its Series B and Series C preferred stock, and provide incremental liquidity to take advantage of current pricing dislocations in residential mortgage assets.

Houlihan Lokey served as exclusive placement agent to MFA, assisting in arranging, structuring, and negotiating the $500 million private senior secured loan and $1.65 billion in new asset-level term financing, as well as its financial advisor on the disposition of a pool of non-qualified mortgage residential whole loans. The success of the transaction highlights Houlihan Lokey’s ability to bring industry, capital markets, and financial restructuring expertise together to achieve a comprehensive solution for our clients, especially during periods of extreme market volatility.