Municipal Mortgage & Equity LLC (MuniMae) says it has modified the terms of the previously announced sale of its agency lending operations to Oak Grove Commercial Mortgage LLC, a new company formed by Mud Duck Equities LLC.
Under the two-part transaction as originally announced, MuniMae received a $10 million bridge loan from Oak Grove and agreed to sell its agency loan operations to Oak Grove in a transaction in which upon closing of the sale, MuniMae would receive $23.5 million in a combination of cash and forgiveness of the loan and two series of preferred interests in Oak Grove with a combined liquidation preference of $47 million.
The preferred interests were subject to reduction in some instances, including reduction of up to $15 million to the extent Oak Grove is required to make loan loss-sharing payments to Fannie Mae and other government-sponsored agencies with regard to loans that had been sold to those agencies by MuniMae.
Under the revised transaction, the bridge loan to MuniMae is being increased to $15 million. The $23.5 million portion of the sale consideration will not change, but the $47 million of preferred interests will be in three series that will have preferred yields that are somewhat lower than those originally agreed upon. Also, the amount by which the preferred interests could be reduced as a result of government-sponsored agency loss-sharing arrangements was increased to $30 million.
"The modifications to the transaction will help both of us," says Michael F. Falcone, MuniMae's CEO. "The changes will accelerate our receipt of cash from the transactions, and should make it easier for the buyer to attract investors. We are also increasing the buyer's loss sharing protection. We think it very likely, even in the current economic environment, that our loss-sharing obligations will be well below the $15 million protection we had agreed to provide in the original transaction. We do not expect the increase in protection to affect us. However, it provides additional comfort to Oak Grove in case mortgage defaults are far higher than either of us predicts."