SPACS are essentially private equity funds that were made available in a public offering. These blind pools were popular in the early and mid-2000s during the boom years, Hoffmann tells GlobeSt.com, and many are coming to the end of their investment terms. As far as he knows, this is the first time a SPAC has been used to form a REIT. "I hope we will see more of these structures--they are very efficient." For instance, he pointed out, the newly formed REIT would be created at or near book value as opposed to the standard 93 cents on the dollar.
Under the agreement, the common stock of Capitol issued through Capitol's November 2007 IPO will convert on a share-for-share basis into 100% of the common stock of Two Harbors. Capitol's founders will retire 100% of their pre-IPO founders' shares. As a condition of the transaction, Capitol's warrant holders will be asked to amend the strike price of their warrants to $11.00 per share in exchange for extending the warrant expiration by one year to November 7, 2013.
The deal has to be approved by shareholders, Hoffmann says. It won't close until Q3 2009. Assuming it goes through, Two Harbors will focus on residential mortgage backed securities--as well as opportunities made available in TALF and TARP, Hoffmann says.
Two Harbors' investment team will be led by co-chief investment officers Steve Kuhn and Bill Roth. Kuhn joined Pine River from Goldman Sachs Asset Management in January 2008. Roth is joining Pine River effective June 16, from Citigroup Global Markets. Its CEO will be Tom Siering, who joined Pine River as a Partner in 2006 from EBF & Assoc. Two Harbors will be externally-managed by PRCM, a wholly-owned subsidiary of Pine River.
© Touchpoint Markets, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to asset-and-logo-licensing@alm.com. For more inforrmation visit Asset & Logo Licensing.
