American Capital Readies 36M Share Offering

BETHESDA, MD-Locally based American Capital Agency Corp. is planning to make a public offering of 36 million shares of its common stock. The company also plans to grant the underwriters a 30-day option to purchase an additional 5.4 million shares of common stock to cover over-allotments, if any.

The REIT plans to use the net proceeds to acquire additional agency securities and for general corporate purposes. American Capital did not return a call to GlobeSt.com in time for publication.
American Capital is well positioned to ride several macroeconomic and political trends at the moment. One is the apparent willingness of the Federal Reserve to keep interest rates at their current levels. Another is the ongoing negotiations in Washington over GSE reform. Although the path Congress and the White House will eventually take is hardly clear right now, it is safe to guess that some assets will be spun off their books. 

"It is probably safe to say that there will be less mortgages held on the balance sheets of those two GSEs, and that is where the mortgage REITs come in," NAREIT senior vice president of Research and Industry Information Brad Case said recently in a video posted on the association’s website. "They are one possibility for taking over much of the ownership of mortgages the GSE have been doing to date."

A third, related trend, is the investor interest in these vehicles. American Capital and Annaly Capital Management were among the top REITS in share sales over the past three months and a JPMorgan Chase & Co. report from earlier this year suggests this equity surge will result in some $50 billion of additional government-backed bonds, according to a report in Bloomberg.

Indeed investment flows have been strong enough to warrant this week’s launch of the Pine River Mortgage REIT Index by Minnetonka, MN-based Pine River Capital Management L.P. The index, which includes American Capital Agency, is to provide a benchmark for investors interested in tracking the performance of REITs that invest in residential mortgage backed securities. The residential mortgage REIT sector, the company noted, has grown at a compound annual growth rate of 33% since 2008 to a current market cap of nearly $36 billion.