Exantas Capital Corp. announced that ACRES Capital Corp. through its subsidiary, ACRES Capital, LLC, has acquired the Company's Management Agreement from an affiliate of C-III Capital Partners ("C-III"). In addition, the Company has entered into separate definitive agreements with Massachusetts Mutual Life Insurance Company and a fund managed by Oaktree Capital Management, L.P. for new capital commitments aggregating up to $375 million. The Company expects the new financing to provide ample liquidity to meet current financing requirements, and for new investments. As a result of the transaction, Exantas's new manager, ACRES, has assumed management responsibility effective immediately and will begin to implement the Company's business plan to preserve and grow book value and earnings.
"Exantas has assembled a high quality portfolio and strong market position that we intend to continue to grow into a market leader in commercial real estate lending," said Andrew Fentress, Co-Founder of ACRES and newly appointed Chairman of the Board of Exantas. "The financings provided by MassMutual and Oaktree are a testament to the strength and quality of Exantas's business and portfolio and we expect the financings will allow us to navigate the evolving market and execute on our objective to deliver long-term value to shareholders. We look forward to discussing our plans on the second quarter earnings call."
ACRES is a dedicated middle market commercial real estate lender led by a management team with extensive public company and mortgage REIT operating experience. ACRES has a robust asset management and origination platform along with a proven ability to source and maintain sponsor relationships, which will benefit Exantas as it restarts its origination efforts.
The new financing agreements materially increase the liquidity profile of Exantas and are structured with flexible terms that create optionality, allowing the Company to take a proactive approach to asset management to drive value from the existing portfolio as well as opportunistically enhance its balance sheet.
Management Transition
In connection with the transactions, ACRES and the Company entered into an Amended and Restated Management Agreement. Andrew Fentress and Mark Fogel, Co-Founders of ACRES, will serve as Chairman of the Board, and as President, CEO and Board member, of Exantas, respectively. Andrew Farkas and Jeffrey P. Cohen have resigned from the Board of Directors with immediate effect. ACRES has added 18 professionals from the former C-III team to its staff, including David Bryant, current Chief Financial Officer of Exantas, who will remain with the Company in his current role to maintain operational continuity.
Senior Secured Financing Facility
The Company entered into a $250 million seven-year senior secured financing facility with MassMutual that can be utilized to fully repay Exantas's warehouse and repurchase facilities, thereby reducing the potential for any future margin calls under such facilities. The facility has an advance rate of 55% and an interest rate of 5.75%. Flexible operating terms include a two-year revolving period followed by a five-year term, with no prepayment penalty after year one.
Unsecured Notes
The Company entered into agreements with Oaktree and MassMutual to provide a commitment of up to $125 million in the form of seven-year unsecured notes. The unsecured notes have a cash interest rate of 8.75% and a PIK interest rate of 3.25%, totaling an annual interest rate of 12.00%. The Company issued $50 million of unsecured notes to Oaktree and MassMutual at closing and may draw up to an additional $75 million over the next 18 months at Exantas's option. The unsecured notes provide balance sheet flexibility and enhance Exantas's liquidity position. In connection with the $50 million unsecured notes issued at closing, Exantas also issued to Oaktree and MassMutual warrants to purchase an aggregate of 1.4 million shares of common stock at an exercise price of $0.01 per share. In connection with the issuance of the remaining $75 million of additional unsecured notes, the Company will issue Oaktree and MassMutual additional warrants to purchase an aggregate of 2.1 million additional shares ratably as commitments are funded.
JMP Securities served as Exantas's financial adviser and Morrison & Foerster LLP served as Exantas's legal advisor. Ledgewood, P.C. served as special counsel to Exantas. Raymond James served as ACRES' financial adviser and Hunton Andrews Kurth LLP and Cadwalader, Wickersham & Taft LLP, served as ACRES' legal advisors. Clifford Chance LLP served as C-III Capital Partners' legal advisor.