DALLAS, Dec. 9 /PRNewswire/ -- Capstead Mortgage Corporation (NYSE: CMO) today announced that its Board of Directors has
authorized the Company to purchase up to 10,000,000 shares of its common stock
for a cash purchase price of $4.55 per share, representing approximately
18 percent of the shares outstanding.
The cash purchase price represents a
premium of 23 percent over the December 9, 1999 closing price of $3.6875.
tender offer will only be made pursuant to offering materials being
distributed to stockholders and will commence on December 9, 1999 and expire
at 5:00 p.m., New York City Time, on January 14, 2000 (unless extended).
PaineWebber Incorporated is acting as Dealer-Manager for the tender offer.
The Board of Directors is not making any recommendation to the stockholders as
to whether or not they should tender any shares pursuant to the offer.
Members of the Board of Directors and Executive Officers have agreed not to
participate in the tender offer.
The Company also announced that an affiliate of Fortress Investment Group
LLC, a real estate investment and asset management company (``Fortress''), has
made an aggregate investment of $51,200,000 in the Company through the
purchase of 5,378,000 shares of Capstead's newly created $0.56 Cumulative
Convertible Preferred Stock, Series C (the ``Series C Preferred Stock'') and
5,378,000 shares of Capstead's newly created $0.40 Cumulative Convertible
Preferred Stock, Series D (the ``Series D Preferred Stock'') (together, the
``Preferred Stock'') for $4.76 per share.
The Series C Preferred Stock is
convertible into one share of common stock and has a liquidation preference of
The Series D Preferred Stock is convertible into one share of common
stock and has a liquidation preference of $4.76.
This investment by Fortress
represents an ownership interest in Capstead of approximately 16 percent,
assuming the conversion of the Preferred Stock.
Further assuming the
successful completion of the 10,000,000 share tender offer, this investment
will represent an ownership interest in Capstead of approximately 19 percent.
The successful completion of the tender offer and the investment by Fortress,
considered together, is not expected to have a material dilutive effect on the
Company's book value per common share.
In connection with this investment by Fortress, Capstead's Board of
Directors (i) approved an immediate increase in the number of Directors
serving on Capstead's Board from six to eight and appointed Mr. Wesley R.
Edens, Chief Executive Officer and Chairman of Fortress, and Mr. Robert I.
Kauffman, President of Fortress, to fill the newly created vacancies on the
Board and (ii) authorized the Company to enter into a Supplemental Agreement
to the Stock Purchase Agreement (the ``Supplemental Agreement'') with Fortress.
The Supplemental Agreement provides that upon Capstead's stockholders'
ratification of certain matters contained in the Supplemental Agreement at a
special meeting of stockholders to be held by April 30, 2000, (i) the Board of
Directors will be reconstituted to consist of four directors appointed by
Fortress and three directors appointed by Capstead, with Mr. Edens serving as
Chairman and Chief Executive Officer and Mr. Ronn K. Lytle serving as Vice
Chairman and (ii) Fortress will acquire 5,000,000 shares of Capstead common
stock by means of either open-market purchases, the conversion of some portion
of the Preferred Stocks, or some combination thereof, within six months of the
If this requirement to acquire the common shares is
fulfilled through open-market purchases, then the total investment by Fortress
will represent an ownership interest in Capstead of approximately 23 percent
before and 27 percent assuming, the successful completion of the 10,000,000
share tender offer, calculated assuming conversion of the Preferred Stock.
Capstead is currently considering modifying its investment strategy to
replace a portion of its existing mortgage investments with a diversified
portfolio of credit sensitive commercial and residential mortgage-backed
securities, most of which are expected to be ``investment grade'' at the time of
purchase as determined by national rating agencies.
This proposed strategy is
intended to improve the Company's earnings prospects while providing more
stability during periods of increased interest rate volatility.
The sale or
other disposition of some of the Company's mortgage investments in order to
implement this proposed strategy could result in the recognition of a portion
of the losses currently reflected in the Company's balance sheet.
be no assurance as to what extent, if any, this proposed strategy will be
implemented and if implemented, whether or not it will be successful in
meeting the Company's goals.
Capstead will hold the above mentioned special meeting of stockholders for
the purpose of voting on (i) ratification of certain matters contained in the
Supplemental Agreement, which will have the effect of approving a new Board of
Directors for Capstead and (ii) approval of a 1-for-2 reverse stock split of
the Company's common stock.
A detailed description of the proposals will be
provided in a proxy statement expected to be distributed to stockholders by
Commenting on the investment by Fortress and the proposed changes to the
Board of Directors, Mr. Lytle, Chairman and Chief Executive Officer of
Capstead, said, ``We are at a crossroad in determining the future direction of
Our current strategy of exclusively managing residential
mortgage assets to achieve reasonable investment returns has proven very
It is my belief that new leadership with experience in other
facets of real estate investing will help to give our Company the opportunity
to succeed over the long term.
Mr. Edens, with his 16 years experience in the
capital markets and real estate-related investments, and the organizations
with which he has been associated, has achieved a considerable level of
And with Fortress's considerable ownership interest in
Capstead, I believe Fortress's interests are very well aligned with the
interests of our stockholders.''
Mr. Edens, Chairman and Chief Executive Officer of Fortress, added, ``We
believe there are excellent opportunities currently available in the real
estate debt markets and we expect that our real estate investment experience
coupled with Capstead's experience in the residential mortgage finance
industry and strong organizational infrastructure will position the Company to
improve and stabilize shareholder returns.
We believe that Fortress's
substantial equity investment provides an alignment of interest with the
shareholders of the Company and we are very excited about the future prospects
of the Company.''
Fortress is a real estate investment and asset management company
headquartered in New York.
Fortress manages approximately $760 million of
private equity and focuses on undervalued and distressed real estate, both
domestic and international.
Capstead Mortgage Corporation, a mortgage investment firm with assets of
over $9 billion, earns income from investing in mortgage assets and other
This document contains ``forward-looking statements'' (within the
meaning of the Private Securities Litigation Reform Act of 1995) that
inherently involve risks and uncertainties.
The Company's actual results and
liquidity can differ materially from those anticipated in these forward-
looking statements because of changes in the level and composition of the
Company's investments and unforeseen factors.
As discussed in the Company's
filings with the Securities and Exchange Commission, these factors may
include, but are not limited to, changes in general economic conditions, the
availability of suitable investments, fluctuations in and market expectations
for fluctuations in interest rates and levels of mortgage prepayments,
deterioration in credit quality and ratings, the effectiveness of risk
management strategies, the impact of leverage, liquidity of secondary markets
and credit markets, year 2000 compliance failures, increases in costs and
other general competitive factors.