Capstead Mortgage Corporation (NYSE: CMO) (“Capstead” or the “Company”) today announced the redemption of all 186,249 outstanding shares of its $1.60 Cumulative Convertible Preferred Stock, Series A (“Series A Preferred Stock”). The redemption date will be June 13, 2013, and the redemption price will be $16.40 per share of Series A Preferred Stock plus accrued and unpaid dividends for the period from April 1, 2013 through the day prior to the redemption date in an amount equal to $0.3165 per share, for a total payment per share of $16.7165. On and after the redemption date, the Series A Preferred Stock will no longer be deemed outstanding, and all rights of the holders of these shares will terminate, including the right to receive quarterly dividends.
Holders of the Series A Preferred Stock have the right, upon surrender of their shares before the close of business, Eastern Daylight Time, on June 6, 2013 to convert any or all of their shares into shares of Capstead’s common stock, at a conversion rate of 1.6584 shares of common stock for each share of Series A preferred stock. Cash will be paid in lieu of issuing any fractional shares. After the close of business on June 6, 2013, the right to convert permanently expires, and all Series A Preferred Stock not so converted will be redeemed at the redemption price on the redemption date. Based on the $13.01 closing price of Capstead’s common stock on May 10, 2013, it is in the economic interest of holders of the Series A Preferred Stock to exercise their conversion rights on or before June 6, 2013. Management strongly encourages holders of the Series A Preferred Stock to contact their broker (or Wells Fargo Shareholder Services if shares are held in certificate form) for assistance in converting their shares.
A notice of redemption will be mailed to Series A Preferred Stock holders of record on May 13, 2013. Any questions relating to the notice of redemption should be addressed to Wells Fargo Shareowner Services, the redemption and paying agent, at:
Wells Fargo Shareowner Services
PO Box 64874
St. Paul, Minnesota 55164
Domestic calls: 1-800-401-1957
International calls: Visit website for international access codes
As a result of the pending redemption of the Series A Preferred Stock it is expected that nearly all of these shares will be converted into shares of common stock because it is economically advantageous to do so. These conversions will result in a modest amount of dilution to our existing common stockholders since the $16.40 liquidation preference of the Series A Preferred Stock divided by the current conversion rate results in the effective issuance of common stock at $9.89 per share, which is less than the Company’s current book value per share of common stock. Should all 186,249 shares of Series A Preferred Stock convert into shares of common stock, the Company would record a $0.01 decline in book value per share of common stock.
Capstead is a self-managed real estate investment trust (a “REIT”) for federal income tax purposes. The Company earns income from investing in a leveraged portfolio of residential adjustable-rate mortgage pass-through securities, referred to as ARM securities, issued and guaranteed by government-sponsored enterprises, either Fannie Mae or Freddie Mac, or by an agency of the federal government, Ginnie Mae.
Cautionary Note Concerning Forward-looking Statements
This document contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include, without limitation, any statement that may predict, forecast, indicate or imply future results, performance or achievements, and may contain the words “believe,” “anticipate,” “expect,” “estimate,” “intend,” “will be,” “will likely continue,” “will likely result,” or words or phrases of similar meaning. Forward-looking statements are based largely on the expectations of management and are subject to a number of risks and uncertainties including, but not limited to, the following:
- changes in general economic conditions;
- fluctuations in interest rates and levels of mortgage prepayments;
- the effectiveness of risk management strategies;
- the impact of differing levels of leverage employed;
- liquidity of secondary markets and credit markets;
- the availability of financing at reasonable levels and terms to support investing on a leveraged basis;
- the availability of new investment capital;
- the availability of suitable qualifying investments from both an investment return and regulatory perspective;
- changes in legislation or regulation affecting exemptions for mortgage REITs from regulation under the Investment Company Act of 1940;
- changes in legislation or regulation affecting Fannie Mae, Freddie Mac, Ginnie Mae and similar federal government agencies and related guarantees;
- deterioration in credit quality and ratings of existing or future issuances of mortgage securities guaranteed by Fannie Mae, Freddie Mac or Ginnie Mae; and
- increases in costs and other general competitive factors.
In addition to the above considerations, actual results and liquidity are affected by other risks and uncertainties which could cause actual results to be significantly different from those expressed or implied by any forward-looking statements included herein. It is not possible to identify all of the risks, uncertainties and other factors that may affect future results. In light of these risks and uncertainties, the forward-looking events and circumstances discussed herein may not occur and actual results could differ materially from those anticipated or implied in the forward-looking statements. Forward-looking statements speak only as of the date the statement is made and the Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
Lindsey Crabbe, 214-874-2339