Mortgage REIT Dynex Capital Inc. has entered into a memorandum of understanding reflecting an agreement in principle to settle all claims in a class action lawsuit and separately said it expects to exercise a refinancing option on collateralized financings.
The MOU would settle a lawsuit filed by the Teamsters Local 445 Freight Division Pension Fund in February 2005 that alleged violations of the federal securities law.
Under the terms of the MOU, the real estate investment trust would pay $7.5 million into an escrow account following the negotiation and execution of a definitive settlement agreement and preliminary approval by the court. The company continues to deny that it violated any federal securities laws and said it has agreed in principle to this settlement solely to eliminate the expense, burden and uncertainty of the litigation.
The company's chairman and CEO Thomas Akin said in a press release the settlement would not materially impact the core operating or future earnings potential of the company.
Separately the company announced this month it expects to exercise its option to refinance approximately $74.2 million in collateralized financings with repurchase agreement financing.
Approximately $23.7 million of the collateralized financings is a securitization financing bond issued by the company in 1998 that finances commercial mortgages.
The bond had recently received an upgrade in investment grade rating to AA from A-plus.
The company expects the refinancing will save it approximately $2 million annually in interest costs based on current anticipated market conditions and repurchase agreement financing terms (which are subject to change), as well as about $600,000 annually in amortization expense.
Dynex also expects to take a one-time non-cash charge of $2 million on the redemption of the securitization financing bond related to remaining unamortized discount recorded on the bond as of Sept. 30.
